Financial Communications: Playing by the New Rules

Now that Regulation Fair Disclosure has been in effect nearly a year (PRN, Sept. 11, Aug. 28), industry insiders are coming to terms with how the law is affecting investor
relations. Once slow to adopt the Internet as a communications vehicle, preferring face time with institutional investors and Wall Street analysts, IR professionals now clamor to
get online with stakeholders. And with new technology comes a host of new procedural quandaries for financial communicators struggling to keep pace with the "fairness" issue. Even
if you're not an IR professional, the issues of fairness and balance in question here apply to many areas of corporate communications.

Reg FD governs the disclosure of nonpublic, "material" information. Information is considered material if there's a substantial likelihood that a reasonable shareholder would
consider the information important in making a decision to buy or sell a company's securities. Examples of material information include news of management changes, mergers,
acquisitions, layoffs, new product launches and divestitures.

The easiest method of public disclosure is a press release issued over a wire or news service. Posting information to your corporate Web site is not, in itself, considered
sufficient dissemination.

Regardless of the nature of financial information online, 34,000 people logged onto Cisco Systems' quarterly earnings report (a Webcast) in May to hear the latest projections
from the tech giant's executives. And while the audience, by nature of its size, wasn't exactly intimate, participants nevertheless represented an elite group, considering their
computer savvy and the fact that access to the Webcast was incumbent on bandwidth.

According to Gail Whitcomb, VP at Miller/Shandwick Technologies in Boston, some corporate attorneys now advise top brass that, in order to be Reg FD-compliant, a press release
need only indicate that material information will be announced during an upcoming Webcast. In other words, the release itself needn't specify the material nature of the
announcement. "In my mind, that's not adhering to the letter of the law," says Whitcomb, "but it's really a question of whether the company wants to take a conservative versus
an aggressive approach."

Carl Thompson of Carl Thompson and Associates, an IR specialist for more than 20 years, maintains that a news release, disseminated to financial wire services, is still the
vehicle for broad distribution of material information, according to SEC regulations. "We didn't really need a new law to create fairness," he says, "because Reg FD is consistent
with SEC regulation that has existed for many decades. This media and legal hysteria about Reg FD is similar to the Y2K scare," Thompson notes, but it doesn't change how IR is
done or the nature of material information.

Whitcomb conducted a workshop on digital IR during PR NEWS' Strategic Online Communications Seminar last month. She offered the following tips on Web cast etiquette, analyst
relations and other financial PR matters:

Allow broad participation in quarterly conference calls (including all interested
investors and the press). Make it possible for interested parties to listen
via a dial- in number or Webcast.
Hold the call after public dissemination of the press release, not before.
Script the call and have it reviewed by your legal team.
Plan to "say it all" during your conference call (a significant departure
from prior IR practices when much care was taken to ensure nothing material
was said during the call that did not appear on the release).
Feel free to provide earnings guidance during the call; however, executives
should be advised not to indicate that they will provide additional material
information after the call on a selective basis.

(Thompson advises releasing another news release if new information that
could help investors make market decisions is disclosed during the call,
primarily because a large population does not have access to online information.)
Read a safe harbor statement (a disclosure statement that protects your
company from updating forward-looking statements made during the call) at
the beginning of your conference call/Webcast. Make replays available for
a limited time on your Web site, generally not longer than a week.
Do not post a written transcript of the call online. The safe harbor statement
will not protect a written transcript (though many sample safe harbor statements
can be found online at major corporate sites.)

(Thompson's advice differs in that he always encourages companies to post
online a written transcript of quarterly conference calls.)
If your senior management team wishes to engage in one-on-one conversations
with analysts or investors, schedule the meetings to occur shortly after your
earnings release and related conference call. This will largely alleviate
the risk of premature disclosure of material information. Nevertheless, establish
ground rules as to what kinds of questions will not be answered (e.g., internal
financial projections).
If earnings "guidance" is to be offered to analysts or investors in a limited
access setting - such as an investor conference - you should issue a press
release containing that guidance prior to the conference.
As a general rule, a company should not agree to review or comment on draft
analyst reports. If your executives insist on doing so, the reviewer should
limit his or her comments to historical facts or factual descriptions of the
company's business. (The most common instance of unintentional disclosure
occurs when an enthusiastic executive accidentally spills the beans during
a public speaking engagement.)
No comments should be made regarding financial projections or forward-looking
statements in an analyst's draft. If your company chooses to offer comments,
it should also state in writing that the review covers only factual statements
and that the company is not commenting on or endorsing any forward-looking
statements or financial projections.

(Contacts: Gail Whitcomb, Miller/ Shandwick, 617/536-0470; Carl Thompson, Carl Thompson & Associates, 800/959-9677, [email protected])

IR Role Models

Must-have online items investors crave:

News archive
Corporate profile
Stock quotes - historical charts and real-time quotes
Officer listings and executive bios
Annual report
List of analysts who cover your company
Push emails (opt in) alerting investors to stock price changes, SEC filings and news headlines
Financial info, including balance sheets, income statements and cash flow data
Calendar highlighting analyst briefings and other key events
Executive presentations - particularly from your annual meeting
IR contact information
IR site map
Quarterly earnings report conference call replays
Instructions on how to buy stock in your company

Check out these model sites:

Source: Gail Whitcomb, Miller/ Shandwick Technologies.

. . . and for more IR information:

http://www.ctaonline.com for the 10 Commandments of keeping your company out of trouble with the SEC. Click on IR, then 10
Commandments.
http://www.niri.org for resource guides, publication lists and upcoming IR conferences and seminars.

IR Role Models

Related

Recent