PR Newswire Association LLC
December 13, 2002
Via E-mail: email@example.com.
Re: Release Nos. 33-8145; 34-46768; File No. S7-43-02
Ladies & Gentlemen:
PR Newswire Association LLC is pleased to submit this letter in response to the Securities and Exchange Commission's request for comments on its Proposed Rule: "Conditions for Use of Non-GAAP Financial Measures".
PR Newswire established the immediate, simultaneous electronic distribution of full text press releases to news media in 1954. Today, operating around the clock, 7 days a week, PR Newswire accurately, quickly and cost-effectively transmits information received directly from the issuers of that information to thousands of print, broadcast, wire and online news media, the investment community and individual investors in the United States and overseas. PR Newswire offers access to 22,000 media outlets worldwide, over 58,000 registered journalists, and up to 3,600 websites, which include major consumer and investor portals, online publications and news sites, and equities trading and industry-specific sites with a cumulative audience of more than 100 million visitors monthly. Through the financial portals, like Bloomberg, Dow Jones and Reuters, news is actively pushed to millions of professional investors where it is often enhanced with commentary and analysis. Recipients of this news have access not only to the stories that journalists may write about the news release but the full text of the news release itself. Retail investors are actively alerted to corporate news through the media but also through their own direct access to many heavily trafficked portals like Yahoo!Finance, AOL and www.msn.com that carry the PR Newswire feed. Through the PR Newswire feed, all constituents, both institutional and retail investors alike, have access to these corporate stories simultaneously, ensuring a level playing field, and providing access to information quickly and efficiently.
We are strongly supportive of Section 409 of the Sarbanes-Oxley Act which requires companies to:
As noted above, PR Newswire has been following this same philosophy for almost 50 years and we appreciate the opportunity to comment on portions of the Proposed Rule Change where we believe we have the benefit of years of experience working with corporations, investors and the media.
The proposed new item 1.04 to Form 8K would require the filing with the Commission of releases of announcements disclosing material non-public information about completed annual or quarterly fiscal periods. The proposal cites comments from the American Bar Association (ABA) which suggest that requiring an 8K filing of earnings reports which would:
The current practice, followed by over 97% of companies trading on US stock markets2 is to issue a news release to the general public via a commercial newswire as soon after the close of the quarter that financial results are available. This requirement is part of the public company guidelines promulgated by the various self regulatory organizations ("SROs"). While we believe that adding the requirement to file a Form 8K for certain quarterly earnings results may be a positive enhancement to the current "best practice", we do not believe that a Form 8K filing alone should ever be deemed sufficient.3
Investors and the media have been following the same tried and true methods of public dissemination of information through the newswires for decades; and corporations can rely on the fact that their most important constituents will find their news easily and efficiently on the newswire. Investors have been trained actively to follow aggregate financial databases (like Dow Jones, Reuters, Bloomberg, etc.) and financial Web sites (like Yahoo!Finance, AOL, etc.) and know that they can expect to find all breaking stories from the public companies in which they invest.
We take issue with the second point suggested by the ABA, i.e., that submitting an 8K would bring this information into a formal disclosure system which would make it available electronically on a wide-spread basis. When an issuer files a Form 8-K with the Commission, the only way that information will reach an investor will be if the investor knows in advance when to anticipate the disclosure in order to look for it and knows where to find the information. Also, an investor must be able to access the SEC website or a site carrying EDGAR content. We believe that the visibility of sites carrying EDGAR content is extremely limited when compared with major news and financial portals. While the internet continues to reach a growing segment of the investment population in the U.S., an internet posting alone excludes approximately one-half of the population4, and investors outside the U.S. are even less likely to have access to web-based information. The internet is only one component of full, fair and simultaneous disclosure. A release issued through a newswire service will reach the internet community but will also reach numerous media and other outlets as well, ensuring the broadest possible disclosure.
Allowing the filing of a Form 8-K, in and of itself, to satisfy the disclosure requirements set by the self-regulatory organizations, would reduce the reach of the disclosure requirements by not getting the broadest possible dissemination of the information to the investing public. Furthermore, because press releases do not need to be "EDGAR-ized" and are not dependent on the limited hours of the Commission's EDGAR system5, press releases generally provide prompter and more widespread disclosure than do Form 8-K filings. PR Newswire operates on a 24X7 basis, ensuring that timely news be disseminated immediately. In order to promote the broadest possible dissemination, we believe that the SROs should maintain their existing rule that requires the issuance of a widely disseminated press release to traditional media outlets and on-line news service providers, in addition to the SEC's proposals requiring Form 8K filings for certain earnings data. It should also be clear that the news release must be issued before the submission of those earnings results on Form 8K to ensure that all interested parties have access simultaneously. Only by maintaining this practice will all investors be treated fairly.
During peak financial reporting periods, PR Newswire processes more than 1,000 time-critical press releases per day6 And, before any corporate release is issued over the PR Newswire, it undergoes a stringent verification process to ensure that the story is issued by the appropriate corporate entity. Our editors follow a procedure whereby we only accept releases from an individual at the company who is authorized to issue releases; we contact each client at an authorized phone number to ensure that we have reached the right individual before the story is issued. The breadth of coverage of this corporate news, coupled with the verification processes that PR Newswire maintains to ensure the integrity of each story, makes this news a time-tested, critical source of information that is actively embraced by the investing public. Requiring investors to visit the EDGAR web site and search through documents company by company is time-consuming and inefficient for any investor who requires ready, immediate access to information.
In addition, we believe that disclosure through a press release should require prompt dissemination of the full-text of the press release as written by the news source. Dissemination to the public of an edited press release or of a press release that simply links back to the Form 8K is not sufficient. Many of the most critical financial news aggregators do not provide immediate Internet access, e.g., an investor accessing news on Dow Jones or Reuters cannot automatically link to a Form 8K document which is posted on the EDGAR Web site via a link from a news release.
PR Newswire is pleased to confirm to the Commission that, based on our experience serving the financial and investor relations requirements of thousands of America's large and small publicly-owned corporations, most financial and investor relations professionals are familiar and comfortable with the new technologies of PR Newswire and other disseminators of public information and are trained and eager to use these facilities to meet the needs of their shareholders and the investing public.
For almost 50 years PR Newswire has been privileged to assist publicly-owned corporations fulfill not only the letter of their disclosure obligations, but the "spirit" of disclosure as well. The far-reaching distribution provided by PR Newswire levels the playing field for investors worldwide, by providing access to material corporate information from verified sources. In the current marketplace, this type of broad, timely distribution is not only necessary, it is expected by the investing public.
We hope that the Commission will find our comments helpful. The undersigned would be available at the Commission's convenience to discuss further any aspect of these comments.