Category Archives: Investor relations

Experts view sustainability reporting is of growing importance for investors

Even as the SEC moves to re-shape disclosure requirements, many companies… with IR taking the lead... are making changes to their reporting formats at their own initiative. We asked five leading experts to weigh in.

Vintage question > Many in the accounting community are hoping to add a disclosure framework for sustainability. Do you think there should be such a framework/requirement? Why/why not and if yes, what do you think such a framework should look like?

Broc Romanek > Yes – I think sustainability information requirements are long overdue. I am strongly in the camp that thinks climate change is a huge issue and we’re behind the eight-ball on this. I think the Sustainability Accounting Standards Board (SASB) is doing great work creating voluntary standards industry-by-industry– it is a ton of work – but I wish they were mandatory. Fifty years ago is when weneeded the real change

If they remain voluntary, it means they aren’t going to happen for many companies. That’s just the way of human nature, right? Big companies have fiduciary duties to their shareholders to maximize profit, and so if it’s not mandatory, then they won’t all comply. Some companies will – they’ll be pressed because they have shareholders demanding it. But it would happen much more slowly.

Robert Herz > I’m on the board of directors of the SASB, and we see that investors and financial analysts are asking for more disclosure in this area. One survey conducted by the CFA institute last year said that sustainability information is an increasingly important area for them to consider in their analysis of valuation and investment recommendations. And the current information they get is not adequate or reliable.

Many companies now produce separate sustainability or corporate social responsibility reports, and I applaud them for doing that. But sometimes they are selective and basically say, “Here are all the nice things we did last year” – community activities, reducing their carbon footprint, and various other things. They don’t necessarily focus on the issues that really matter in the context of their industry.

The SASB was created to figure out and develop a set of standards industry-by- industry, and it covers 10 sectors and 79 industries, with standards that get to the most important issues in an industry context. And then we had to determine which metrics could be produced to address those issues so that you get comparable reporting. I believe that’s the right approach. Some people would say, “No, you need more standardized disclosure on climate risks,” for example. My response to that is, “Well, yes, climate risk is a fairly pervasive issue, but how it affects different companies tends to be different by industry.”

If you’re a real estate developer, climate change will obviously affect where you decide to put your developments, and gets into energy efficiency, LEED standards, and things like that. If you’re in the apparel industry, it may focus on your ability to adequately source cotton. If you’re in the automobile industry, it involves fuel efficiency and electric cars.

Financial services firms do not have much of a carbon footprint at all, while on the other hand a petroleum and chemical company may have a lot more.

Materiality of information is very important as well. There was a research study last year by Harvard Business School called “Corporate Sustainability: First Evidence on Materiality,” that used the SASB lens to look at what matters and what doesn’t when it comes to sustainability. They looked over a 20-year period at over 2,000 companies and showed that both the financial performance and stockholder returns of the companies that focused on the more material issues greatly outpaced the companies that focused on a broader range of sustainability issues.

So material issues as defined in the SASB approach do much better. We obviously think that this is the right approach to take in order to really get the usable, comparable, investor-grade data.

Erik Bradbury > As Bob pointed out, the innovations are happening, such as the work being done by the SASB. And in our view, we will see more innovation the more the SEC and other regulators get out of the way and allow companies to present nformation in the most meaningful way to investors. The SEC asked a lot of questions about sustainability disclosures, and we recognize the importance of sustainability issues to certain investors, including non-governmental organizations, local communities, and many others. But our view is that the commission shouldn’t pursue an approach where all issues that are important to a particular subset of stakeholders are required to be disclosed.

In other words, our view is that the SEC should focus on material items and avoid calls to expand disclosure requirements intended to address societal issues unrelated to its core mission of investor protection. Many of these issues don’t appropriately consider materiality. They don’t consider whether the information is useful to reasonably knowledgeable investors. There is a lot of information that certain investors want to know about companies – but is it important for making an investment decision? We don’t think that the threshold for including this information within the 10-K has been reached.

On a voluntary basis, most of our member companies have sustainability reports. But including these issues within a 10-K is a whole different story.

Dan Hanson > A principles-based framework for sustainability disclosures would be a positive. However, a requirement could have unintended consequences, and so I would advise to take one step at a time. The uniformity and materiality lens that the SASB standards bring is very helpful. I was one of the founding members of the SASB board of directors in 2011 and I took the view as a bottom-up investor that the SASB was something whose time had come. There needed to be an initiative to drive some degree of consistency for disclosure of sustainability information for investors.

You see literally thousands of corporate social responsibility reports being issued, in addition to securities filings, as well as third-party metrics and rankings being published, and it’s become a booming cottage industry of different methods and approaches. Without regulation, the market is responding to issuer and investor interest in sustainability data. So the SASB is encouraging reporting of this data in a more standardized way. As an investor, uniformity can make it much easier to interpret those reports and metrics and have some understanding of what’s meaningful in the business, because you can create benchmarks and provide context to understand metrics in comparison to competitors and peers. That is the benefit that SASB brings to the conversation.

It focuses on the most vital issues that are fundamentally, financially, and operationally relevant. Issuers could be provided with a principles-based framework of disclosure related to sustainability, but it would be best left to management to determine what the most material issues are to their particular businesses and how they want to disclose that information. I support the market-based approach that SASB brings. Companies are disclosing this information in any event, and having a more unified approach to disclosure can create more efficiency for both the issuers and users.

Ultimately, I think this discussion is about the concept of integrated reporting. Different people may use that term to mean different things, but the GE example cited by Erik and Bob is a great case of an issuer responding to a market need for better communication. That’s the market working, not a regulatory- driven approach.

Likewise, Broc’s earlier comment on Buffett’s “straight talk” in his CEO letter as a model for good disclosure is spot-on. And guess what – like all annual report CEO letters, those letters are not even part of the 10-k regulatory filing. So while there is an important role for regulation, some of the best examples of effective disclosure and communication to shareholders come from management teams that go beyond the scope of a regulatory “check the box” approach of minimum compliance, and treat their shareholders as true owners and partners in the business.


Investor relations is leading by (disclosure) example, say experts

Even as the SEC moves to re-shape disclosure requirements, many companies… with IR taking the lead... are making changes to their reporting formats at their own initiative. We asked five leading experts to weigh in.



Vintage question > Many companies have started voluntarily implementing reforms to their disclosure procedures. According to an EY and FERF survey, 74% of respondents were already taking action to improve their financial reporting. What kinds of measures can companies take on their own? And to the best of your knowledge, what kind of reaction from investors are companies getting to these measures?

Erik Bradbury > We’re finding that many companies are finding innovative and modern ways of improving disclosures to make them more meaningful for investors. We’ve done some research studies on this topic and had a conference recently at Pace University in collaboration with EY, where we brought together regulators, investors, and preparers to talk about some of the changes we’re seeing.

v-redthe-irwhitepaperOur view is that if we want to improve capital markets overall and help investors understand financials through disclosure, we need to have an open mind and consider the best way to get information in the hands of investors so that it can be digested easily and in the most efficient way. That’s how we see all the efforts of the SEC, but also arguably many of the voluntary efforts of our companies that they’ve made to improving disclosure. GE is an outlier – they’ve done some
of the most extensive improvement efforts – but there are other companies that have made incremental improvements over the years. And the innovation and improvements in disclosure that companies are voluntarily taking on are benefiting investors. It’s very clear, and these need to continue.

Where the SEC has a role in this is that they can continue to encourage and, more importantly, remove barriers to disclosure to allow for more innovation. One of the biggest risks to improvement efforts right now is fear. The fear is, “If I change this disclosure, what is the SEC going to think? If I previously agreed to add this disclosure and now I’m five years removed, is it still important?” Fear might prevent you from making those changes.

What I think the SEC has recognized is that they do have a role to play in improving disclosure for the benefit of investors overall. That’s why these proposals are important, because they ask users, preparers, investors, analysts, and stakeholders what they think about certain disclosures and where they can improve, and whether they should focus on the principle or rules-based regime, whether they should remove bright-line disclosures, whether there should be sunset provisions, and so on.

Robert Herz > I think that voluntary efforts are clearly a good and important part of the solution, and companies have been doing a number of things. Erik provided a great example in General Electric – they’ve done very comprehensive revamping of their disclosure documents. Last year, they issued a 65-page document called their “Integrated Summary Report,” which basically takes what management thinks is the most important information from their annual report, their sustainability report, and their proxy, puts it all together and says, “Here’s what we think is most important and here’s how it all relates together.”

At the same time, they didn’t do away with the separate documents. But they did this other, more concise document as well. Of course, companies like GE that have hundreds of financial reporting professionals, lawyers, and all sorts of resources can do that. Other large companies could also do it, but for most companies, I think they can only make more modest efforts without broader rule changes.



Broc Romanek > On the disclosure side, companies are beginning to draft their proxies so that they’re more usable, and I think “usability” is a key term – I’ve been emphasizing this for 15 years now. One example of measuring usability is to have subjects use the internet, either on a mobile device or a laptop, and have scientists observe how they actually use it. The reality is that how people think they act online is quite different from how they actually act.

Applying these usability principles to disclosure documents is important, because to the extent we as disclosure lawyers can draft our documents in ways that make it more likely for an investor to be able to navigate and consume them, the more likely investors are to read them. They’re also more likely to find information that they might not find otherwise. These principles can be applied to the print documents as well, and some companies have been doing that.

Part of the solution is to use more graphs and charts, but also change the actual narrative sections – for example, using proper headings that are more descriptive. This goes back to the plain English movement that the SEC forced on companies back in the mid-’90s, when they required companies to start writing their proxy statements in plain English. This is that all over again, but a voluntary effort. The SEC isn’t forcing companies to do it – at least not yet.

But I do want to emphasize one thing, which is that if something is only voluntary, it’s typically not at the top of a company’s list of priorities. We’re living in an era of incredibly rapid change and limited resources in the legal department. Then, you also have companies that purposely don’t want to make it easier for investors to read their documents.

Anna Pinedo > Companies are indeed beginning to eliminate repetitive disclosures on their own. For example, instead of including critical accounting policies in the MD&A section, they are cross-referencing to the notes to the financial statements. Similarly, other disclosures in the MD&A are being eliminated to the extent contained in the notes to the financial statements. Clients are also including charts and graphs in their filings, which are much more investor-friendly formats, and these are being well-received. In proxy statements, we had already seen much greater use of charts, graphs and images.




NEW WHITEPAPER: The role of IR in competitive intelligence

Investor relations officers’ competitive information gathering typically starts with comparative valuation data and stock performance, as well as commentary on industry, product and market trends and performance. Because IROs are situated in a daily environment where information of all types can flow broadly and rapidly across multiple channels, they have the opportunity to make unique contributions to competitive-intelligence gathering within the organization.

discl-buttonIR sits very much in the flow of strategically important information, ranging from financial performance and competitive positioning of peers to industry trends and the value investors are willing to place on different management strategies and actions. Sometimes, this information is available nowhere else.

Tools like DisclosureNet offer detailed insights into the comparative AND competitive new, financial filings and sector drivers.



While this intelligence-gathering role has been carried out informally by IROs in the past, the responsibility is increasingly becoming a formal part of the IRO’s job description. A recent survey of IROs found this aspect of the role has grown to be a recognized part of the IR team’s mandate, with 95 percent of IROs reporting that they regularly gather information on their company’s market competitors.

vintage_ir_competitiveintelligence300Nearly two thirds of IROs report that their intelligence-gathering effort feeds senior management’s strategic discussions and decision-making, while 61 percent say it informs IR strategy and 22 percent report regularly providing competitive intelligence to board members.

Call it competitive intelligence, market intelligence, media monitoring or something else, a successful intelligence gathering function shares a few common characteristics that translate into effectiveness, efficiency and strategic importance.

This white paper explores the evolving role of IR in competitive intelligence and how industry thought leaders across North America are taking it on as part of the IR mandate.

Experts speak on what’s driving SEC disclosure reform

With multiple releases related to disclosure in 2016, the SEC opened up a controversial can of worms. Five experts give their opinions about the Commission’s proposals.


Vintage question > How effective do you think the disclosure changes proposed by the SEC would be in achieving more efficient disclosure processes? And more generally, which specific areas of disclosure do you think are most in need of reform?

Broc Romanek > These are just concept releases right now, and when the SEC has a really big project, they do a concept release even before the proposing release. That’s what is happening here, and what that means is that this a multi-year project – in fact, it might be a decade- long project.

What will probably happen is that there will be proposals regarding small, niche areas, since that is really the only way for an agency to approach rule- making of such a large scale like this. The reason is that if the proposal is too big, there will be some controversial parts that will cause it to stall, particularly because the rule-making of any federal agency can now become politicized. Federal agencies also need to go through a cost-benefit analysis now, which by itself requires an agency to do a lot more homework before they propose and then adopt a rule.

As for which areas I think are most in need of reform, in my opinion there are two main high-value things investors are looking for. One of them is what I would call “straight talk.” This is the way Warren Buffett writes for Berkshire Hathaway – his annual report is very popular because it’s straightforward, written in a conversationalist style. I believe he writes it himself – it’s definitely not the CEO’s lawyer writing it – and he’s telling it like it is. He’s one of the only people to do it, and that is something that investors clearly want but CEOs aren’t doing.

v-redthe-irwhitepaperThe second valuable type of information that investors are really looking for is forward-looking information. Again, even though there is safe harbor in the securities laws to protect companies from liability to some extent, there is still some risk. In hindsight, if some forward- looking disclosure is wrong, a company can likely get sued if the stock price falls. So there just isn’t that much forward- looking information, and analysts and investors have to find other ways to do their homework on companies. Part of that forward-looking information, and part of what Warren Buffett writes about, is strategy. Strategy is part of these first two things that I mentioned – people want companies to talk more clearly about what their strategy is for the future.

There you also have competitive harm concerns – you don’t want to tip off your competitors regarding your strategy. But those are really the things that could probably boost disclosure the most. These are all high-level, but I think any reform should start at a high level and say, “Okay, what do people really want to read?” A lot of the disclosure we’re getting is really secondary and not market-moving information.

Anna Pinedo > I think the rule changes proposed by the SEC would be very effective in improving disclosures and making them more user-friendly and transparent. Eliminating outdated disclosure requirements, such as the need to include the registrant’s stock price performance and certain financial ratios, would also be a useful step I think. Similarly, I think it’s useful to eliminate repetitive disclosures that could be contained in one static “company document.” In my opinion, the areas most in need of attention are the risk factors section and the MD&A section.

Risk factor disclosure has become so lengthy so as not to be helpful to a potential investor. Registrants and their counsel are appropriately concerned about mitigating the risk of future litigation and respond to their concerns by including within the risk factors section numerous risks, including some generic risks, which may affect the registrants’ businesses and financial results. However, many registrants and their counsel choose to over-disclose.

While some commenters may observe that the length of risk factors or the number of risk factors does not pose a concern for potential investors, I believe that the disclosures may become so lengthy that a retail investor may have difficulty identifying those risks that are truly significant.



Erik Bradbury > We’ve done a lot of work in this space over the past few years, including in two recent responses to the SEC releases. By way of background, the FEI has a number of technical committees, the most prominent of which is the Committee on Corporate Reporting (CCR), and it is made up of approximately 45 of the Fortune 100 principal accounting officers, controllers, and other financial executives. To give you an idea of the magnitude, they collectively represent about US$5tn in market capitalization – so it’s a big group.

Our point of view is that we’re supportive of the SEC’s initiatives to review and improve disclosures for the benefit of investors. We feel that the SEC should focus on three areas. The first of these is the need for a principal-based framework. It’s our view that a principle-based framework that is appropriately designed with clearly stated objectives provides the best foundation to deliver decision-useful information to investors and users of financial statements. That was one of the questions asked in the concept release.

Another point we make is that materiality is a key component of this. It should be the primary consideration for determining what gets disclosed and to what extent. What does that mean? It means that bright-line disclosures are unnecessary. Materiality should be the basis for disclosing certain things, and bright-line disclosures don’t consider materiality at all. In some cases, they force companies to disclose things that they otherwise wouldn’t but are clearly immaterial to investors overall.

We also believe that disclosure should be flexible. In general, if you have a flexible disclosure that’s based on meaningful material factors for a registrant’s industry and business, that provides the framework for which a company can disclose information in the most effective way possible. MD&A is a good example of this – MD&A is rather flexible in terms of how companies are able to describe their businesses, and it has arguably stood the test of time.

And lastly, but importantly, we encourage the SEC to continue encouraging registrants to voluntarily improve their disclosures.

Dan Hanson > I’m an active manager of publicly traded equities, and as a fundamental investor I primarily do bottom-up research. I focus on a company’s business operations, and corporate disclosures are a really important part of that. As an investor, there’s no question that there is an issue of information overload, which creates a big burden for reporting companies and users of financial statements alike. The challenge for investors is to figure out what is relevant, which can be like searching for a needle in a haystack.

On the other side, issuers are often motivated by a concern about legal implications of disclosure. So it’s like entropy – you have perpetually more disclosure, without ever any roll-back. So the challenge is to balance the tension of having a good regulatory framework for required disclosure but also step back and allow management to really curate what they think is relevant and present a more concise view of what is material to their business, which will allow the investor to key in on those issues.

Regarding the SEC’s current initiative, I would cite the explosion of comments they received and say that they clearly struck a nerve. There was a huge volume of comments and they were highly substantive. Interestingly, some of them actually came from other government agencies, such as the EPA, as well as from many lawmakers. Some of the dialogue the SEC has had revolves around going to a uniform set of disclosures across government, and there could be a real harmony and elegance to that, in principle.



New whitepaper: How to improve SEC disclosure

SEC disclosure requirements have prompted debate among key stakeholders about the right path forward.

The SEC launched its “disclosure effectiveness” project in 2013, and now the Commission set its sights on revising Regulation S-K and doing away with redundant information. What do experts think about the efforts?



When Congress created the modern corporate disclosure regime in 1933 with the passage of the Securities Act, the lawmakers likely could not fathom the scale to which financial reporting would grow 80 years later. And indeed, it has grown immensely. Yet with the exception of small periodic reforms, the Securities and Exchange Commission (SEC) has rarely made changes to corporate disclosure requirements since then.

But after the JOBS Act of 2012 forced the Commission to consider reporting requirements for “emerging growth companies” and mandated a study on Regulation S-K, their findings suggested a larger project. “The study basically said, ‘Gee, what we really want to do is a more comprehensive review and potential reform of our whole disclosure system,'” explained Robert Herz, a former chairman of the Financial Accounting Standards Board. In April 2016, the SEC voluntarily came out with a 341-page concept release reviewing the requirements for S-K.


As it turned out, people had a lot of opinions on this subject. Two months later, the SEC had received hundreds of comments from lawmakers, officials, academics, and corporate executives. They also received more than 25,000 copies of form letters, many of which asked for more sustainability information. In July 2016, the SEC made a separate proposal to eliminate overlapping provisions on disclosure forms as well.

People in the reporting community have strong and diverse opinions on the subject of disclosure reform. How important is materiality as an element of effective disclosure? Is “less” sometimes “more” when it comes to SEC filings? And should sustainability metrics be made mandatory?

We asked five leading experts to weigh in.



12 month at-a-glance calendar for Investor Relations departments

Working with a new client last week, the discussion went from a cheerfully kind “thank you for the 2017 SEC EDGAR filing calendar” (click here) to a subtle “hey… do you have a calendar for IR, too?”

We did not. But we do now!


Help your internal stakeholders understand the to-do of IR!

Never shrinking down from a client request, we immediately went to task – first asking during that meeting what are the key activities needed to be calendared. As you see, the result is a traditional IR to-do list. Also, except for the 10-K and 10-Qs, the events are driven by broad strokes, month by month, rather than exact dates.


  • Planning stages certainly vary and overlap i.e. earnings news releases and 10-Qs
  • Updating the IR website once a quarter refers to more holistic updates: text narratives, FAQs, and other non-automated feed
  • Best practices suggest two or three days each quarter for non-deal roadshows in targeted cities
  • Holding a formal Analyst Day in a target city, like NYC, generally aligns with non-deal meetings
  • The NIRI Annual Conference is in June

Happily, the client was grateful for the calendar – they will be sharing it internally as a directional illustration of IR’s year.

Click here to download a high resolution PDF.



Zen and the Art of 10-K Maintenance

Yah… I know. There’s nothing remotely zen-like about producing a 10-K.

That said, as you’ll read within our client “kudos” comments, our design, typesetting and production teams strive to make our role in the process as kumbaya as possible. For many issuers, (especially IPOs), the meetings often begin with an overall review of what is required in a 10-K.

Click image to view

Click image to view

All public companies other than foreign private issuers must file an Annual Report on Form 10-K following the end of each fiscal year. The Form 10-K includes four parts, the items of which are described below.

Part I of Form 10-K provides a general description of the business of the company and its properties along with the risk factors that investors should consider when investing in the company.

Part I also includes:

  • a description of any material legal proceedings other than routine litigation incidental to the business to which the company or any of its subsidiaries is a party or to which any of its property is subject, and any such proceedings that were terminated in the fourth quarter of its fiscal year (along with a description of the outcome)
  • for accelerated filers and large accelerated filers, a description of any material unresolved comments from the SEC staff regarding the company’s periodic and current reports that were received 180 days or more before the end of the fiscal year and…
  • if applicable, a statement that the information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Act and Item 104 of Regulation S-K (which are discussed in more detail in section of this handbook entitled “The Dodd-Frank Act”) is included in an exhibit to the Form 10-K

Part II of Form 10-K includes a comparative presentation of selected financial data for the last five fiscal years, management’s discussion and analysis of the company’s operating results and its liquidity and capital resources, and the audited consolidated financial statements of the company (which may also be filed in Part IV), along with certain supplementary quarterly financial data.

Part II also includes:

  • information relating to the company’s common stock, including the trading market, historical high and low sales prices, the number of registered holders, the payment of cash dividends, unregistered sales of securities, and company repurchases of its common stock during the fourth fiscal quarter
  • quantitative and qualitative disclosures relating to market sensitive instruments held by the company and other primary market risk exposures (smaller reporting companies do not need to provide the information required by this item)
  • if there has been a change in the principal accountants of the company, disclosure of:  1.) any disagreements with the accountants that the accountants would have been required to disclose; or  2.) any “reportable event” that had occurred, which was material and accounted for or disclosed in a manner different from what the former accountants would have apparently concluded was required (which disclosure is required with respect to disagreements or reportable events that occurred during the year in which the change in accountants took place or during the subsequent year)
  • the conclusion of the company’s principal executive and financial officers regarding the effectiveness of the company’s disclosure controls and procedures (which are discussed in more detail below in the “Disclosure Controls and Procedures” part of this section and in the section of this handbook entitled “The Sarbanes-Oxley Act”)
  • management’s assessment of the effectiveness of the company’s internal control over financial reporting, including disclosure of any material weakness in its internal controls
  • an attestation report of the independent auditors on the company’s control over financial reporting
  • any changes in the company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, such internal controls and…
  • any information required to be reported in a Form 8-K during the fourth quarter that was not reported

Companies need not comply with disclosure requirements relating to disclosure controls and procedures and internal control over financial reporting until after they have filed an Annual Report on Form 10-K for a prior fiscal year. In addition, as codified in Section 989G of the Dodd-Frank Act, smaller reporting companies and non-accelerated filers are exempt from the requirement to include the attestation report of the independent auditors on the company’s internal control over financial reporting.

benchmark your budget (and creative design) via an audit of last year’s
annual report.

PDF-buttonSimply upload your
2015 annual report PDF here.

Part III of the Form 10-K includes disclosures relating to directors, executive officers, corporate governance, executive compensation, the beneficial ownership of management and certain large shareholders, related person transactions, director independence and accountant fees and services. Part III items may only be incorporated by reference if such proxy statement is filed within 120 days of the company’s fiscal year end. If the proxy statement is not filed within such 120-day period, the company must file an amendment to its Form 10-K prior to the end of such period that includes the Part III information.

Companies should list under Part IV of the Form 10-K their financial statements and the schedules required to be filed in Part II, along with all exhibits required to be filed by Item 601 of Regulation S-K.

The exhibits to the Form 10-K will generally include:

  1. all material contracts
  2. the company’s organizational documents
  3. all instruments defining the rights of security holders
  4. a list of the company’s significant subsidiaries
  5. any applicable consents of experts and counsel (namely, the consent of the independent auditors where the financial statements are incorporated by reference in one or more registration statements)
  6. certifications under the Sarbanes-Oxley Act, which are described in more detail below and…
  7. interactive data files with the company’s financial statements in XBRL. Most exhibits can be incorporated by reference to a previously filed document. Management contracts and compensatory plans and arrangements must be specifically identified.

Summary of Selected Items

Risk Factors. Item 503(c) of Regulation S-K requires public companies to disclose under the caption “Risk Factors” a discussion of the most significant factors that make investing in the securities of the company risky or speculative. The factors should be those risks that are specific to the company and should not include risks that apply to every public company. As a general rule, any fact or circumstance that could pose a risk to the company’s financial condition, results of operations or potential growth, or which could otherwise materially affect the performance of the company’s securities, may be a risk factor. In addition to identifying the risk factors, the company must discuss how each factor could affect the company or its securities. Companies should not include mitigating language in their risk factor disclosures.

In addition, the discussion of risk factors must be written in plain English. Smaller reporting companies are not required to provide the information required under this item. Many smaller reporting companies, however, will include risk factors in their Annual Reports to take advantage of a safe harbor defense for forward-looking statements.

Section 21E of the Exchange Act provides a safe harbor defense for companies in securities litigation for forward-looking statements that are made by the company in its Exchange Act reports. This defense is similar to the defense in Section 27A of the Securities Act and the “bespeaks caution” defense developed in securities case law. Forward-looking statements, which are commonly found in a company’s MD&A (defined below), are statements not of historical fact but of the expectations of the company with respect to its future performance or other predictions or expectations regarding future events.

To qualify for the safe harbor, companies must identify the forward-looking statements in the report with sufficient particularity and accompany the statements by cautionary language that identifies the significant factors that could cause actual results to materially differ from those contained in the forward-looking statements. The risk factors identified in the Form 10-K and other filings can provide the meaningful cautionary language required by the safe harbor.

Management’s Discussion and Analysis (MD&A) of Financial Condition and Results of Operations.

Item 303 of Regulation S-K requires a discussion and analysis of the company’s operating results and its liquidity and capital resources. As articulated by the SEC, the purpose of this disclosure is to present the company’s financial condition and results of operations “through the eyes of management” and to provide the context for analysis of the financial information presented in the periodic report. A critical requirement of the Management’s Discussion and Analysis of Financial Condition and Results of Operations (better known as the MD&A) is to disclose any known trends, commitments, events or uncertainties that have had or are reasonably likely to have a material effect (positive or negative) on the company’s operating results or liquidity.

The MD&A should identify and discuss the principal drivers that have impacted and will continue to impact the company’s operating results and financial condition, as well as key performance measures, including non-financial performance indicators, which are used by management and which would be material to investors, particularly where management refers to these measures in its earnings releases. In general, the MD&A should emphasize material information and de-emphasize or omit immaterial or duplicative information.

Among other material items, the MD&A should include an analysis of the following matters relating to the company:

  • changes in cash flows
  • debt instruments and certain related covenants, including covenants:  1.) the company has breached or is reasonably likely to breach; or  2.) that materially restrict the company’s ability to incur additional debt or to undertake an equity financing
  • critical accounting policies and estimates that require subjective judgments to account for uncertain matters or matters subject to change
  • any material tax contingencies or trends or uncertainties that could affect the company’s tax obligations or effective tax rate
  • commitments for capital expenditures
  • material contingencies arising from pending litigation and regulatory matters
  • commitments for environmental expenditures and…
  • any off-balance sheet arrangements

The MD&A should include a liquidity and capital resources section that provides a clear picture of the company’s ability to generate cash and to meet existing and known or likely future cash requirements. The discussion should focus on material changes and trends in operating, investing and financing cash flows and the reasons underlying those changes. The MD&A also must include quantitative tabular disclosure regarding the company’s contractual obligations.

Sarbanes-Oxley Certifications

The Sarbanes-Oxley Act created two certification requirements for the principal executive and principal financial officers of public companies. Section 302 of the Sarbanes-Oxley Act requires a certification that is filed with each quarterly and annual report and which states that the reports are accurate and complete and that the company has in place adequate disclosure controls and procedures and internal control over financial reporting. Section 906 of the Sarbanes-Oxley Act requires a certification that is furnished with any report containing financial statements and which states that the report fully complies with Section 13(a) or 15(d) of the Exchange Act and fairly presents, in all material respects, the financial condition and results of operations of the company. Although paragraph 3 of the Section 302 certification may be omitted in certain circumstances, and plural references to “certifying officers” in paragraphs 4 and 5 can be made singular, the certifications must otherwise strictly follow the language provided in SEC rules.The SEC has said that it will not accept an altered certification even if the alteration would appear to be inconsequential. If a filed certification is not correct and complete, the accompanying report may be considered by the SEC to be materially incomplete and deemed not filed (thus potentially affecting Form S-3 eligibility, among other things).


The Form 10-K must be signed on behalf of the company by a duly authorized officer as well as by its principal executive officer(s), its principal financial officer(s), its controller or principal accounting officer, and by at least a majority of the members of the board of directors. When the form is filed by a limited partnership, it must be signed by at least a majority of the members of the board of directors of any corporate general partner that signs the report.

Tips for presenting your non-deal roadshow to an online audience

Since 2010, I’ve hosted hundreds of CEOs at, our monthly “digital roadshow platform,” connecting these CEOs and their senior executives directly to a pool of over 40,000 institutional and individual investors.

~~~FYI: Our next conference is a special two-day event, Oct 4 – 5, partnered with the OTC Markets. (check this out here)  ~~~otc-blog


Watching all these presentations, I have witnessed, first-hand, the best and the worst online presentations. From that, I have pulled together the key thoughts and strategies to place your company in the best ONLINE light.

That word – ONLINE – is the point of this discussion. Although, per RegFD, the material content that you present to a physical audience is no different than what you will present at a virtual audience, how you present is very different.

  • Your virtual audience will leave the very moment they lose interest – it’s a web-mentality
  • Your virtual audience is surrounded by distraction
  • Your virtual audience have small screens
  • Your virtual audience is immune to your CEO’s “in-room presence”

Here are a few points that may guide your success. To be exact, virtual presentations are live, audio and slide webcasts with “presenter controlled” slide advancement. Online audience members can type and submit questions.

1.) Get a PROFESSIONAL photographer to make a head shot of you / CEO / presenting executives.

All virtual investor conferences (not just ours) request a speaker photo. Don’t use a cropped snapshot. Don’t use an iPhone and “go stand next to that wall.”

Spend the short money. Go to Sears. Go to JC Penny’s. You must do this.

0b5aqqqqq50eBe cognizant that this is the only image of your presenter the audience will have. Ask yourself, “is that the face of trust?” The face people will give their money to?

2.) Unless your speakerphone is very, very expensive (or you do not have opposable thumbs) pick up and use the phone’s handset. 

Objectively, it always assures the sound quality. Subjectively, it allows the presenter to relax and just “talk normal” and your INVESTORS. DO. NOT. HAVE. TO. LISTEN. TO. THAT. ANNOYING. SPEAKERPHONE. SHOUTING. TONE.

3.) The competition is not a peer in your sector; it’s that cute cat video on YouTube.

Get to the point quickly with a concise, 15 minute presentation. At a physical event, companies have the luxury of trapping investors in a room… not so with a virtual event. Also, use plain English.

4.) Simplify your slides’ visuals.

All webcast platforms shrink your slides down – plus we now have the scale of mobile tablets to think about. Nothing smaller than 24pt font size. Detailed photos, like aerials maps, will be illegible. Crop in to the key point you want to make. No snazzy slide transitions.

5.) Speak sloooooooowly. 

Although you are on the phone, try to keep the pace of a live presentation. We all tend to talk fast on the phone.

6.) For retail investors, deliver the most important message first. 

“Yes, we offer dividends.” Asking about dividends is the #1 question asked at

7.) You may need to seed the Q&A with a couple of your own questions. Live or online, getting over that first question hump is important. Don’t, however, throw a softball – use a real question from your recent earnings call. The goal is not to “fool anyone,” just to get the dialog going.


8.) Rehearse the presentation on your company’s WebEx type account to non-technical and non-financial people. This will amplify the pros and cons from the points above.


PS: For VERY detailed insight into the minds of your investors, request our “How do investors consume investor relations content” study. Free here.


PR departments work with financial journalists almost 2:1 over IR

Last month, with the release of our fifth annual Social Journalism Study, we provided an in-depth look at journalists’ perspectives on social media – globally –  and how their understanding and usage of social media has evolved. You can get the report here.

Many key findings were disclosed, including:

  • Journalists believe social media is most important for publishing and promoting content and interacting with audiences
  • Facebook and Twitter are the top platforms, but most journalists use a variety of social media
  • About half of U.S. journalists feel they could not carry out their work without social media
  • Most journalists feel they are more engaged with their audiences because of social media
  • A majority of journalists have a good relationship with their PR contacts, though less than half consider them to be reliable sources
  • Email continues to be the preferred form of contact between journalists and PR professionals, but social media follows closely behind

From this, the discussion moved from PR to IR and their interactions with journalists. It occurred to me that I had never read a report on the interactions IR actually have with financial journalists. So we asked our IR Room clients and  other IROs. We received 236 responses.


As you see, we have a reverse bell curve, with close to 2:1 for IR departments not interacting with financial journalists.

“[When] possible I bring key financial journalists to the attention of PR and advocate for proactive interaction with them.”

“We used to have a communication manager that maintained contact with media, but with the energy downturn this role has been pushed to IR. With that said, IR responds to incoming requests but does not actively foster relationships with the media.”

The other interesting point is that the IR departments that are proactive (“yes’) towards targeting journalists are all small cap and below, and the largest parentage of “no” are large and above.

Lastly, reviewing these two findings again…

  • About half of U.S. journalists feel they could not carry out their work without social media
  • Most journalists feel they are more engaged with their audiences because of social media

… illustrates that social media is absolutely both a source and an audience that investor relations, albeit kicking and screaming, need to listen to.


Investor relations and content credibility

Investor Relations Officers – and their support network – have been deep into content marketing long before content marketers were into content marketing. The lessons that IR can share with marketing are  1.) truth, 2.) transparency and 3.) building content credibility.


That sounds pedestrian, however, the ramifications for a public company and its’ influencers’ content exaggeration has serious consequences via the SEC.

Washington D.C., Sept. 6, 2016 — 

The Securities and Exchange Commission today charged the CEO of a sexual health products retailer and a paid promoter with orchestrating fraudulent promotional campaigns to tout the company’s stock.

The SEC alleges that Scott S. Fraser, who also was a major shareholder in Las Vegas-based Empowered Products Inc., separately ran a newsletter publishing business and hired Nathan Yeung to secretly help him promote Empowered Products through online newsletter articles purportedly authored by independent writers. But Fraser and Yeung actually authored, authorized, and distributed the rosy articles about Empowered Products themselves, working under such pseudonyms as “Charlie Buck” and then hiring other promoters to disseminate the promotions to their respective subscriber lists in exchange for fees. Meanwhile the promotions failed to disclose that Empowered Products and Fraser approved and paid for the advertisements.

Washington D.C., Sept. 16, 2016 — 

The Securities and Exchange Commission today announced fraud charges in a scheme involving illegal stock sales and false financial filings of a company that makes containers for growing marijuana.

An SEC investigation found that William J. Sears orchestrated the scheme along with his brother-in-law Scott M. Dittman, who was the CEO and sole officer at Fusion Pharm Inc. while Sears concealed his control from behind the scenes. Sears and Dittman hired Cliffe R. Bodden to help them create fraudulent corporate documents that enabled Fusion Pharm to issue common stock to three other companies controlled by Sears, who then illegally sold the restricted stock into the market for $12.2 million in profits while hiding the companies’ connection to Fusion Pharm.

Washington D.C., Sept. 13, 2016 — 

The Securities and Exchange Commission today announced that a self-proclaimed “stock trading whiz kid” and his stock newsletter company in Los Angeles have agreed to pay nearly $1.5 million to settle charges that they defrauded subscribers through false statements and misrepresentations.

You get the point.  Per the SEC, painting a “rosy” picture is punishable.

Fraudulent “advertising” has always been with us – however in the hot buzz of content marketing, it’s detrimental. Exaggerative content marketing of your services may not have the legal gravitas of equity markets’ pump-n-dump, however its important to recognize the ease of fact-checking by prospects is instantaneous. Your content credibility is instantaneous. Building trust (to drive an audience further along the buyer’s journey) is instantaneous.

Two examples:

  • The current presidential environment – fact checking is a real-time action during live speeches.

Most all of content marketing discussions focus on the creation of quality work ie whitepapers, blogs, infographics, webinars. IR departments, unlike marketing, don’t have the same freedom to “create” content – so content credibility is paramount. The mantra we express to clients…

“Shareholder communications builds shareholder confidence. Shareholder confidence builds shareholder value.”  

…is their investor’s/buyer’s journey. Marketing certainly has better tracking mechanisms for their buyers, but the end product is the same. (Substitute the word “customer” in staed of “shareholder” and you’ll understand what I mean.)