Speech by SEC Chairman:
Statement at Open Meeting on the Use of Company Web Sites
Chairman Christopher Cox
U.S. Securities and Exchange Commission
July 30, 2008
The first item on our agenda is a proposal from the Division of Corporation Finance recommending that the Commission issue an interpretative release to provide guidance to issuers on the application of the Exchange Act to the use of company web sites as a means of disseminating information.
Ongoing technological advances in electronic communications have increased both the markets' and investors' demand for more timely company disclosure and the ability of companies to capture, process, and disseminate this information to market participants. Indeed, one of the key benefits of the Internet is that companies can make information available to investors quickly and in a cost effective manner. The use of electronic media is arguably superior to providing company information the old way. It's a better way to provide information to most investors since today it can be presented in an interactive format that allows each individual to click through or "drill down" to the level of detail that is appropriate to him or her.
The Internet has changed a lot since 2000, which was the last time the Commission provided comprehensive guidance on the use of the Internet and electronic media. Back then, the idea of the web as a "social network" was still being developed. Web sites such as MySpace, YouTube, LinkedIn, and Facebook didn't even exist. The idea of creating a social network where shareholders could meet and exchange views was barely imaginable. "Blogs" hadn't really entered the public lexicon. And syndication technologies — such as Atom and RSS — were still in development. But as each of these technological developments has taken hold in the marketplace, that in turn has raised new securities law issues for public companies to consider.
Technological advances, and the reduced costs associated with the implementation of technologies over time, now allow the inclusion of more interactive and current information on company web sites than was the case previously. That has moved web sites beyond just being filing cabinets for electronic documents. Today, company web sites are being shaped by the market's desire for highly current and interactive information. We recognize that allowing companies to present data in formats different from those dictated by our forms, or more technologically advanced than EDGAR, can be a significant help to investors.
I'd especially like to thank the Federal Advisory Committee on Improvements to Financial Reporting, led by Chairman Bob Pozen, for encouraging the Commission to focus its attention to this important issue. In February of this year as part of its interim Progress Report, the Advisory Committee expressed concern that the lack of clear guidance from the Commission is hindering the development of newer, better, or more informative web sites for investors. To respond to these concerns, the Advisory Committee recommended that the Commission prepare interpretive guidance that will clarify the rules of the road. Today's interpretive release from the Division of Corporation Finance is directly responsive to that recommendation.
The guidance we are considering today is divided into four parts.
First, the release clarifies how information posted on a company web site can be considered "public" under Regulation FD, and provides guidance for companies to assist them in complying with Regulation FD's public disclosure requirements.
Second, the interpretive guidance clarifies the liability for certain types of electronic disclosure. Among other things, it provides guidance to companies on how to provide access to historical or archived data without having it be considered reissued or republished every time it is accessed anew. It provides guidance on how companies can hyperlink to third-party information or web sites without having to "adopt" the content there for liability purposes. And it provides guidance on the appropriate use of summary information in the context of the securities laws' antifraud provisions.
The third part of the guidance clarifies that information posted on company web sites would not generally be subject to rules under the Sarbanes-Oxley Act relating to a company's "disclosure controls and procedures."
Fourth and finally, recognizing the significant developments in web site design to incorporate interactive and dynamic design features, the guidance would clarify that information need not be presented to satisfy a "printer-friendly" standard, unless other rules explicitly require it.