This week’s NIRI Fundamentals of IR brought RegFD to the top of the cue again. One of the attendees asked a very straight-forward question: “what happens if your company is in non-compliance of RegFD?” We can assume that these “IR newbies” are still struggling with the 50 shades of grey of “what is material” as well as learning how to squelch an “enthusiastic” CEO who is sitting in front of a few key investors or analysts.
The answer had three parts:
1.) Your company will be “embarrassed” but not fined.
2.) Your company will be “embarrassed” AND fined substantial dollars.
I expected those two answers. Both are bad for the company’s reputation and shareholder confidence. I was unaware of the third penalty…
3.) If you are in the room, and don’t react to a possible material disclosure, you may be banned from investor relations. SEC CYA ALERT! GET THAT 8-K OUT ASAP!
Coincidentally with the NIRI session, Inside Council Magazine featured a RegFD article authored by David M. Lynn, co-chair of Morrison & Foerster LLP’s Public Companies and Securities Practice.
Some of his thoughts are below.
- Control of the flow of material non-public information outside of an organization by substantially limiting the number of officers, directors or employees that are authorized to speak publicly on behalf of the company, as well as establishing a “central clearinghouse” for the information by appointing a compliance officer for the purposes of the policy
- Pre-approval of presentations to analysts or investors, no matter what the forum, by the compliance officer
- Any requests for information, comments or interviews made to officers, directors or employees should likewise be presented for consideration by the compliance officer (subject to some limited exceptions for normal course communications)
- Limitations on communication with analysts, so that earnings guidance and other sensitive information is not provided to securities analysts, unless the guidance is provided strictly in accordance with the Regulation FD policy, and that any review of analyst reports, if permitted, is limited to historical items and similar factual matters
- Limitations on the use of social media, including blogs, Twitter, Facebook, LinkedIn and other similar outlets, to the extent that communications through these channels may be inconsistent with the Regulation FD policy
- Ongoing monitoring of unusual trading activity, analyst and investor communications, and market rumors to determine if any corrective disclosure is necessary
- Ongoing training, so that the policy can be effectively communicated to officers, directors and employees
Have a great day.