PR NEWSWIRE ASSOCIATION, INC.
810 Seventh Avenue, 35th Floor
New York, NY 10019-5818
April 4, 2000
Securities and Exchange Commission
450 Fifth Street N.W.
Washington, D.C. 20549
|Re:||Proposed Regulation FD (Securities Exchange Act Release No. 33-7787, File #S7-31-99)|
Ladies & Gentlemen:
PR Newswire Association, Inc. submits this letter in response to the Securities and Exchange Commission's request for comments on proposed Regulation FD.
PR Newswire pioneered 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. During peak financial reporting periods, PR Newswire frequently processes more than 1,000 time-critical press releases per day. PR Newswire also provides for its news-issuing clients (members), which include more than 6,000 publicly owned companies, the latest in multimedia tools to assist in disclosing their sensitive news to the public. These tools include conference calls on the world wide web and the audio, video and text cybercasting of press conferences, annual meetings and other member-company events.
The Commission is well aware of the importance of the role played by PR Newswire in the disclosure of financial news and referred to PR Newswire by name in the proposing Release at page 10. PR Newswire's focus and effectiveness in facilitating the compliance of its listed member-companies' disclosure obligations is also recognized by all the nation's stock exchanges and their respective surveillance departments.
PR Newswire appreciates the opportunity to comment on proposed Regulation FD, as it will have a significant impact on the way disclosure, which is PR Newswire's primary business, takes place far into the new millenium.
PR Newswire supports the Commission's twin goals of promoting the full and fair disclosure of information by issuers to the public at large and protecting investors against selective disclosures of material nonpublic information to analysts, institutional investors and others. On the whole, we support the proposals contained in the Release. We are concerned, however, that several of the proposals may not adequately achieve the intended result.
Under proposed Rule 101, when an issuer makes an intentional disclosure of material nonpublic information, the issuer must "simultaneously" make that disclosure to the public; when an issuer makes a non-intentional disclosure of material nonpublic information, the issuer must "promptly" make public disclosure of that same information. PR Newswire's concern with respect to these provisions is the way in which the material information is disseminated to the general public. We do not believe that the filing of a Form 8-K via EDGAR, by itself, necessarily achieves the goal of prompt and broad public dissemination that this Regulation was designed to produce. When an issuer files a Form 8-K with the Commission, the only way an investor can review that filing on a real time basis is to have access to EDGAR. In order to have access to EDGAR, an investor must be able to access the SEC or freeedgar websites via the internet. While the internet continues to reach a growing segment of the investment population, it is only one component of full and simultaneous disclosure. Allowing the filing of a Form 8-K, in and of itself, to satisfy the disclosure requirements of the Regulation, would reduce the reach of the Regulation by not getting the broadest possible dissemination of the information to the investing public. An 8-K filing, in tandem with a news release, will, in our view, fully address the desired goals.
An additional problem with using EDGAR as an approved form of disclosure under the Regulation without more, at least at the present time, is the time lag between the filing of the Form 8-K with the SEC and the time the disclosed information is actually put up on the SEC website. Generally, this time lag extends over one to three days. Such a time lag is contrary to the Regulation's goal of instantaneous disclosure to the investing public.
In a recent speech given by Commissioner Hunt, the Commissioner commented that the issuance of a press release through a wire service would be more beneficial to a Fortune 500 company than to a Fortune 5000 Company. We respectfully believe the Commissioner's argument is flawed. The objective of Regulation FD is to get selectively disclosed information to the public. By using a wire service, a Fortune 5000 company has the same opportunity for disclosure as a Fortune 500 company. If the goal of the Regulation is the broadest possible disclosure, then the use of a wire service will be more likely to satisfy such a goal than just filing a Form 8-K with the Commission. Regardless of whether a major newspaper picks up a Fortune 5000 company's press release, the wire service method ensures that the news is delivered to the investing public through various means of disclosure, which include print, broadcast, wire, online news media services and databases. We also should point out that distributing a news release through PR Newswire not only assures extremely broad dissemination, it also is likely to be less costly to an issuer than preparing, editing and reviewing a Form 8-K filing with the SEC. In fact, dissemination through PR Newswire also constitutes a form of disclosure because all releases transmitted by PR Newswire are archived and accessible to the public on various PR Newswire websites.
In order to promote the broadest possible dissemination, we suggest that an issuer filing a Form 8-K pursuant to Regulation FD also be required to issue a widely disseminated press release to traditional media outlets or on-line news service providers. How broad a dissemination of the release should be required? It is our view that the scope of the dissemination should correspond to that which the issuer normally does with respect to other similar information which it regularly releases to the public. 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 which is distributed on a piecemeal basis seems less than adequate since there will be some who will have the original statement with more complete information.
PR Newswire is also concerned with the timing for a disclosure which must be made when there has been a non-intentional disclosure of material nonpublic information. The Commission has proposed that an issuer must make disclosure "promptly", which is defined as being "as soon as reasonably practicable (but in no event more than 24 hours) after a senior official of the issuer...knows, or is reckless in not knowing, of the non-intentional disclosure." PR Newswire believes that the reference to 24 hours will result, in practice, in the creation of a 24-hour "safe harbor" for the release of the information. Paradoxically, such a 24-hour period may be both too long and too short. There are some types of disclosures which could be traded on within minutes of a selected analyst or broker receiving the information. Immediate public release should be the norm. At other times, it may be necessary for financial consultants, in-house counsel and outside counsel carefully to review a proposed Commission filing or press release, with the goal continuing to be prompt public disclosure once the materiality of the information has been recognized. When trading on the basis of the selective disclosure is not a high risk, there should be no harm in giving time to permit that review. Another problem with the 24-hour time limit is the situation where the issuer discovers that late on a Friday it has selectively disclosed information. If the issuer's securities are actively traded in overseas or 24-hour markets, it may be inappropriate and completely unnecessary to hold the public release of the information until the opening of the market on the next business day.
PR Newswire's suggestion is to determine when release is required "as soon as reasonably practical" on the basis of all of the surrounding circumstances. We believe these factors should include the nature and complexity of the selectively disclosed information, the extent of the materiality of such information, and the nature of the market for the issuer's securities. This will permit the company which is reporting a selective disclosure to more accurately comply with the SEC rules and regulations and will enable the investing public to receive accurate and complete information. Companies should, to the extent possible, adhere to the old doctrine "when in doubt, put it out--now."
Another alternative provided in the proposed Regulation for disclosure, "the dissemination of the information through any other method of disclosure that is reasonably designed to provide broad public access and does not exclude access to members of the public" is also, by itself, problematic. The example the Commission gives is an announcement given by the issuer at a press conference (by personal attendance or by telephonic or electronic transmission). Access to press conferences, however, is always limited, either because of available space, proximity of the investor to the location of the press conference, an unavoidably short notice period or because several issuers may hold news conferences at the same time. The same problems exist with electronic transmissions of press conferences. In all cases, there is the issue of assuring that investors know in advance of the conference and of their ability to access it. Although we agree that greater participation by those who have heretofore been excluded from such participation is meritorious, we believe the general public would best be served by a full-text press release that is disseminated through both the internet and is transmitted electronically, in full, directly into the editorial computer systems of national and international news media for instant review, analysis, redistribution or publication. Additional disclosures, such as permitting access to, or having a transcript of the press conference disseminated over, the internet should certainly be encouraged.
PR Newswire agrees with the Commission that foreign private issuers who are subject to reporting requirements under the Securities Exchange Act of 1934 should make disclosures under Regulation FD. Such issuers, by their election to access the U.S. markets, have subjected themselves to Commission mandated disclosure requirements, and U.S. investors have a right to be educated about any material information that such an issuer may selectively disclose. There should be no standards set which would allow certain companies to be exempt from the requirement of disclosing Regulation FD information.
We do, however, see a problem with foreign private issuers filing on Form 6-K because Form 6-K filings are not currently required to be filed via EDGAR. We believe that if the Form 6-K were not at the very least filed on EDGAR, the goal of the Regulation could not be achieved. We suggest, therefore, that the Commission mandate that any disclosure under the Regulation which is being filed on a Form 6-K be filed via EDGAR and a full text press release also be disseminated (as discussed above). In the alternative, we suggest that the Commission require that foreign private issuers use one of the alternative means to make disclosure under the Regulation. If foreign private issuers do not file a Form 6-K with EDGAR, the issuer should make some type of alternative announcement to let U.S. investors know that they have filed a Form 6-K containing information required by Regulation FD. Without any further protections or announcements, we believe that just filing a Form 6-K in paper form does not reasonably satisfy the goal of promoting broad public access to selectively disclosed information. Furthermore, the same high-speed press release distribution and disclosure facilities PR Newswire and other services make available to domestic issuers are conveniently and cost-effectively available to foreign companies headquartered overseas.
Finally, 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, it is clear that most financial and investor relations professionals are familiar and comfortable with the new technologies of PR Newswire 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. 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.
PR NEWSWIRE ASSOCIATION, INC.
By:_/s/ Ian Capps_________________