January 28, 2005
It is good that the communication rules have been proposed to be changed. These changes are definitely long overdue. While it is acknowledged that the changes in communication media are driving the need for such a change during the registration process, the SEC must never give up its control of the situation during the review period. The SEC still would have a duty to ensure the dissemination of the correct information and not have an internet road show turn into a source of all kinds of speculations. To achieve these ends, I would propose:
1 Only the CEO and the CFO be allowed to disseminate information during the quiet period. The gun jumping rules should be relaxed so that the additional information, as it becomes available, should be a part of the entire pool now available for the investor to go through before they are able to make an intelligent investment decision. There exists an agency relationship between these two officers of the corporation and the corporation itself. Their actions should be considered binding when they would speak on behalf of the corporation and hence only they should be authorized to give out the new information.
2 Ordinarily these responsibilities should be held non-assignable to a third party such as an underwriter or investment analyst. If, however, delegation does take place, then a clear understanding needs to take place as to what the information purports to do and where the liability should rest in case the information turns out to be fraudulent either in form or substance.
3 The subject matter that is discussed may be in an interview setting like Googles should not contain a discussion about the financial figures of the issuer. The issues under discussion should be related only to issues like the general market situation, product and services information, the use of funds collected from IPO and things of such nature that would selectively condition the market for their upcoming IPO. The financial situation and subsequent changes in it should not be matter of discussion at the road shows and such changes, if needed, should be provided only as an update to the financial disclosures filed with the original registration statement.