Public companies have lived under a new era of heightened regulatory oversight for more than a decade. Management accountability, enhanced investor communication, greater transparency and improved governance disclosure are just a few of the new expected norms.
Yet over the past several weeks, we have witnessed several corporate “missteps” that have damaged reputations and negatively impacted stock valuations. At the same time, as highlighted in a recent IR Magazine article “Authorities target disclosure leaks,” the Securities and Exchange Commission has become more proactive and “the recent rash of insider trading cases – such as the Galleon affair – highlights the dangers for firms.” Add the backlash surrounding the Facebook IPO over alleged selective disclosure, and Regulation Fair Disclosure is once again on the front page and racking up big fees for lawyers.
As many of you know, Regulation FD was adopted by the SEC in October 2000 to address three issues, including “the selective disclosure by issuers of material nonpublic information.”
Our counsel to clients is to always ensure broad and timely dissemination of any “material” information or news to the investing public. While sometimes the situation is not inherently clear cut, information is generally considered material if it is likely that an investor would consider it important in making an investment decision in your company. Such material information must not be disclosed by anyone other than official company representatives through accepted disclosure channels.
Bottom line – refresh yourself and your executives on the rules and either provide simultaneous access to material news to all interested parties, including investors and the media – or not at all. Otherwise, the result could cost your firm dearly both in reputation and valuation.
Joe Calabrese is a Senior Vice President with approximately 20 years of investor relations experience. Working closely with publicly-traded and private companies, Joe provides strategic counsel, message and collateral materials development and has in-depth experience assisting IPOs, M&A transactions, restructurings, restatements, analyst days and management changes.