The SEC recently confirmed that information posted to a company's Web site may be considered, under certain conditions, "public" in order to avoid the application of Regulation FD (fair disclosure) if such information is subsequently provided to analysts and other persons in a context that could, absent the Web site disclosure, be construed to be "selective disclosure." The release also clarified the applicability of the antifraud provisions of federal securities laws to certain content on a company's Web site.
Regulation FD prohibits companies with securities registered under the Securities Exchange Act of 1934 ("Exchange Act") from selectively disclosing material, nonpublic information to analysts and other persons. In the event of selective disclosure, a company must either promptly file a current report on Form 8-K containing the information disclosed, or it may use "another method...that is reasonably designed to provide broad, non-exclusionary distribution of the information to the public."
The SEC confirmed that, in certain circumstances:
- information posted on a company's Web site may be considered "public" such that, for the purposes of Regulation FD, subsequent disclosure of that information that would otherwise have constituted "selective disclosure" would not trigger any further public disclosure obligations since the information would be considered to have been made "public" by virtue of being previously posted on the company's Web site; and
- use of a company's Web site will be considered an adequate, alternative method of disclosure to satisfy disclosure obligations following inadvertent selective disclosure.
The SEC indicated in the release that three factors should be considered in determining whether information on a company's Web site may be considered public disclosure:
- Has the company taken steps to alert the market to the availability of information on its Web site, such that the Web site is a recognized channel of distribution for information about the company?
- If the Web site is known to investors as a location of company information, does posting information on the Web site disseminate information in a manner that would make such information available to the securities marketplace in general? In particular, a company should consider, among other things, the following:
- Whether adequate and advance notice has been made to investors, the markets and the media that important information is routinely posted on its Web site;
- Whether the Web site prominently displays the information in an obvious location that is routinely used for such disclosures;
- Whether the Web site is regularly updated and the information on the Web site is kept current;
- The extent to which information on the Web site is accessed by investors and the media; and
- The nature of the information at issue.
- Has a reasonable waiting period passed since the information was posted to the Web site in order for investors and the market to react to such information? The waiting period may vary depending on:
- Size and market following of the company;
- Nature and complexity of the information at issue;
- Steps the company has taken to make investors and the market aware that important information is posted to the Web site; and
- Use of other channels of distribution of the information at issue.
Application of Anti-Fraud Provisions
The SEC also confirmed that company statements made on the Internet are not exempt from the antifraud provisions of the federal securities laws, and provided guidance on five separate matters in this regard:
- To ensure that previously posted material will not be considered reposted, and trigger a duty to update the statements as of the day it is accessed, the information should be presented in a manner in which it is apparent to the reader that the information is historical such as dating the information, using explanatory statements or headings, and/or posting this information in a separate location on the Web site.
- A company may be liable for misleading third-party information, which the company hyperlinks from its Web site, when the company is involved in preparation of the information, or explicitly or implicitly endorsed the information. The SEC clarified that information will be considered implicitly endorsed by the company in circumstances when the "context of the hyperlink and the hyperlinked information together create a reasonable inference that the company approved or endorsed the hyperlinked information." The release indicated that the company should consider explaining the purpose of the hyperlink, thereby making explicit, rather than implicit, why the hyperlink is being provided. In addition, the posting of general or broad-based hyperlinks to articles that include both positive and negative information about the company, rather than selectively posting hyperlinks to positive information, would reduce the risk that a company would have liability regarding a particular article, or that it endorses or approves of each and every article. The SEC also indicated it does not view a disclaimer alone as sufficient to insulate a company from responsibility for information that it makes available to investors whether through a hyperlink.
- When presenting summary information on a Web site, a company should use appropriate language to identify the information as being a summary and provide the means to obtain more detailed information such as hyperlinks or references to where the sources of information can be accessed.
- Communication by or on behalf of a company in interactive features, such as blogs and shareholder forums, remain subject to antifraud provisions of the federal securities laws. A company should ensure that employees using these forums understand their responsibilities under federal securities laws. Participants in any such blogs or forums may not be required to waive protections under the federal securities laws as a prerequisite to participation.
The SEC also noted in this release that when a company satisfies its disclosure obligations under the federal securities laws by posting information on its Web site, that information will be subject to the Exchange Act's certification requirements relating to disclosure controls and procedures.
Finally, the SEC confirmed that information posted to a company's Web site in satisfaction of the disclosure requirements of the federal securities laws need not be in a printable format unless applicable rules specifically mandate that feature.