Major newswire services have held a lock on all financial-related press releases because their wire and Web distribution channels meet full disclosure requirements for publicly traded companies as defined by the Securities and Exchange Commission (SEC).
Introduced on August 15, 2000, Regulation FD (Fair Disclosure) addresses the selective disclosure of information by publicly traded companies and other issuers. Regulation FD states that when an issuer discloses material nonpublic information to certain individuals or entities—generally securities market professionals, such as stock analysts, or holders of the issuer’s securities who might trade on the basis of the information—the issuer must make public disclosure of that information. In this way, the rule aims to promote full and fair disclosure (see www.sec.gov/answers/regfd.htm).
In the 1990s, investors typically followed their stocks through the financial section of daily newspapers, discussions with brokers, or published reports from the company, or by investing in real-time ticker-tracking services. By the mid- to late-1990s, the Internet permeated our daily lives and transformed how we interact with information (and with each other). As the Web matured, it introduced the real-time capability to buy and sell stocks and to discover rich data and relevant research to make more informed decisions. The access to this precious data and the capability to act on it immediately caught the attention of the SEC. Therefore, the government introduced regulation to prevent selective disclosure and to promote fairness in the dissemination and access of financial information.
Regulation FD fundamentally transformed how companies communicate with investors and also created processes and channels to do so quickly and efficiently.
Through Regulation FD, press release wire services such as PRNewswire, Marketwire, and BusinessWire, among others, created effective communication bridges to reach brokers and institutional, individual, and day traders equally. With the Web, everyone has access to the same information at the same time. However, Regulation FD defined the process of creating and distributing news releases, including content, context, and safe harbor—these news releases are usually governed by the legal department and investor relations (IR) team, not PR or marketing. The legal department takes the prominent role to provide critical information without hype and to prevent any potential lawsuits from shareholders because of the way information is packaged or distributed. A tremendous amount of legal expertise navigates financial press releases to satisfy disclosure and investor satisfaction.
Web 1.0 vs. Web 2.0
In Web 1.0, the Internet introduced a new way to trade stocks and access important financial information. With Web 2.0 and the introduction of Social Media, the capability to publish information and reach vast audiences is setting the stage for another high-profile, industry-changing evolution that will affect financial transactions, regulatory governance, and investor and public communications.
As blogs prominently show, Social Media is reshaping the ability to distribute information and influence decisions. Many industry leaders have petitioned the SEC to consider blogs as an alternative to wire services for disclosure (for the purposes of cost savings, ease of publishing, and the capability to centralize the content).
On July 30, 2008, the SEC announced that they will consider accepting Web sites and blogs as legitimate channels for information dissemination under the Regulation FD requirements. The next day, TechCrunch, a Web log that is coedited by Michael Arrington and Erick Schonfeld and focuses on new Internet companies and products, published Brian’s response to that announcement.