August 17, 2008

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Public Disclosure of Information on Company Web Sites


The US Securities Exchange Commission ("SEC") issued an interpretive release[1] on August 1, 2008 (the "Release") that provides guidance as to how company web sites may be used to disclose information to investors in compliance with federal securities laws.  The release focuses on a few specific areas of securities regulation, including Regulation Fair Disclosure ("Reg FD") and the antifraud provisions of Rule 10b-5 and Section 10(b) of the Securities Exchange Act of 1934 (the "Exchange Act")

The Release addresses four primary topics related to the use of company websites.

  • When information posted to company web sites is considered "public" for purposes of Reg FD
  • How antifraud rules apply to information on company websites, including accessing previously posted materials, hyperlinks to third party information, summary information and third-party information.
  • How certification requirements relating to disclosure controls and procedures apply to information posted to company websites.
  • How information on company websites should be clearly presented.

When company web site information is considered "public" for purposes of Reg FD

            The Release sets out various factors to consider in determining whether information posted to a company website would be considered "public" for purposes of Reg FD.[2] The Release avoids setting a brightline test, instead it provides a number of nonexclusive factors that companies should consider when determining if information on their website will be considered "public", and whether such information would satisfy Reg FD's "public disclosure" requirement.  These factors include:

  • Whether and how companies let investors and the markets know that the company has a web site and that they should look at the company's web site for information. For example, does the company include disclosure in its periodic reports (and in its press releases) of its web site address and that it routinely posts important information on its web site?
  • Whether the company has made investors and the markets aware that it will post important information on its web site and whether it has a pattern or practice of posting such information on its web site;
  • Whether the company's web site is designed to lead investors and the market efficiently to information about the company, including information specifically addressed to investors, whether the information is prominently disclosed on the web site in the location known and routinely used for such disclosures, and whether the information is presented in a format readily accessible to the general public;
  • The extent to which information posted on the web site is regularly picked up by the market and readily available media, and reported in, such media or the extent to which the company has advised newswires or the media about such information and the size and market following of the company involved.
  • The steps the company has taken to make its web site and the information accessible, including the use of "push" technology, such as RSS feeds, or releases through other distribution channels either to widely distribute such information or advise the market of its availability.
  • Whether the company keeps its web site current and accurate.
  • The nature of the information.
  • Whether investors and the market have been afforded a reasonable waiting period to react to the information. 

When company website information is subject to antifraud rules

            The Release explains that the antifraud rules of the Exchange Act apply to company statements made on the internet in the same way that they would apply to any other statement made by, or attributable to a company.[3] The Release provides specific guidance as to how the antifraud provisions may apply when investors access (1) previously posted company statements; (2) hyperlinks to third-party information; (3) summary information; and (4) interactive website features such as blogs or electronic shareholder forums.

When company web site posts should be certified by the company's officers

            The Release explains that information posted to a company web site may trigger the certification requirements set forth in the Sarbanes-Oxley Act.[4]Under the Sarbanes-Oxley act, a company's principal executive officer and principal financial officer must certify that the company has followed proper design and control procedures in preparing reports under the Exchange Act.  The Release clarifies that it is unnecessary for companies to provide such certification for all material on the company web site, unless company web site is the only location where the relevant report is published. 

Company web sites should be readable

While the text should be readable, the Release states that the ability to print a particular browser screen is not a necessity, unless other rules specifically require it. 

Effective Date: August 7, 2008  

[1] Securities and Exchange Commission Release No.s. 34-58288, IC-28351; File No. S7-23-08, 17 CFR Parts 241 and 271 (Aug. 2008).

[2] 17 CFR 243.101(b)

[3] 15 U.S.C. 78j(b)

[4] 17 CFR 240.13a-15(e)