We Are Communication Architects

Building brand awareness through content creation and community engagement.

August 1st, 2008

New SEC Rules Put Pressure on Companies to Innovate Financial Disclosure

The SEC announced that they are approving under certain circumstances company websites and blogs as meeting public disclosure requirements under Regulation FD.

Cause and Effect This announcement will spur a fresh round of innovation. There’s a mini-boom on its way just like what happened with companies touting Sarbanes-Oxley solutions. Instead of automating checks and balances, it will be focused around community building as well as automating and streamlining communication over the web. You’ll see a lot of companies that are currently focused on building generic online communities start touting their IR portal/community building expertise.

We will have to watch for exactly what the “certain circumstances” are that qualify a website or blog as meeting Reg FD, but I suspect that the final definition will amount to requiring an online community. The challenge will then become attracting people to the company IR community. Why would investors go there when Yahoo! Finance or a similar portal fits their needs already? Ironically, this announcement comes on the heels of a recent survey from Deloitte showing that most online communities fail because they’re too self-serving.

What are the Benefits? Long term, companies will see the biggest benefit from the fact that web-based disclosure documents no longer have to be in a format comparable to paper-based information, unless the Commission’s rules explicitly require it. No more death by PDF, companies are actually encouraged to make financial information more user-friendly.

Yes, and companies can also disseminate information via blogs and websites (that meet the above mentioned certain circumstances) rather than PR newswires.

Wait right there – step away from the newswire budget.

Companies will want to really think long and hard about this one as there are a variety of angles to consider that might make this more expensive than just sticking with the wire service. Exactly how often is your company website or blog refreshed? How easy is it to place web content? For large public companies the process for placing content and how often the site is refreshed are huge hurdles. Some corporate websites are only refreshed once or twice a day at set times and the lead times for providing content can be pretty significant.

Does My Company Have the Right Stuff? Here’s a short checklist to see if your company has the building blocks necessary to create a kick-butt IR portal/community.

  1. Open minded legal department
  2. Flexible web infrastructure and web development team
  3. Social Media and Web 2.0 Gurus

If you have all three building blocks, congratulations! Now take your cross-functional team, lock them in a room and don’t let them out until they’ve come up with a user-friendly IR portal that makes angels weep and your competitors drool.

Since we’re currently being mauled by a bear market, anything that attracts potential investors to learn more about your company is a big plus. As long as the company has bullet #1, I’d say still lure that cross-functional team into a conference room. Just realize that the result may not be as huge as if you were able to check all the boxes.

Have everything but the open minded legal team? Sorry, you’ll have to wait this one out.

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