Let’s say you’re the CEO of a company. A competitor or disgruntled ex-employee posts nasty and inaccurate information on a blog that your company website operates. Are you under any regulatory obligation to correct it?
No, you are not. At least that’s what the staff of the U.S. Securities & Exchange Commission said it is recommending today in a draft of new rules designed to encourage more corporate use of websites to disclose required information.
What’s more, the new rules could do much to clear up confusion over meeting the Full Disclosure (FD) rules of the SEC regarding Internet use.
At an SEC meeting today where the rules won a 4-0 vote to go to the next level, new measures were explained that could allow companies to use their websites and blogs to meet requirements under the FD rules. Under certain conditions, such electronic media can be the sole means of disclosure.
A few other measures in the proposal:
- The information on the blog or company Web page does not have to be in “a format comparable to paper-based information” unless the SEC explicitly requires it.
- Hyperlinks to other sites can be used provided that the company explain their relevance.
- Information disclosed on the Web is not generally subject to under the Sarbanes-Oxley Act (of course, the company must still follow SOX for other forms of financial disclosure and attestation.).
- Companies are responsible for what they put out on their Web pages or blogs but are under no obligation to correct inaccurate or misleading information that outsiders post.
SEC Chairman Christopher Cox says he sees the new Web-based rules as a way to make for more efficient and more creative ways to inform potential investors about a firm. Cox argues that using the Web can cut disclosure costs for companies while improving their communication with shareholders.
Indeed, some tech-oriented CEOs, such as Jonathan Schwartz of Sun Microsystems, have complained that they want to communicate with investors and customers on blogs but feel they have to undergo tedious consultations with their lawyers because SEC guidance is so unclear.
Maybe this new round of rules will clear up those concerns. For more info, check a story by IrWebreport and an SEC statement. Full issuance of the rules may occur in about six months.
