Corporate Communications Broadcast Network
November 26, 2002
By Electronic Mail
Jonathan G. Katz, Secretary
Re: Commission File No. S7-40-02
Dear Mr. Katz:
Corporate Communications Broadcast Network ("CCBN") submits these comments regarding the above-referenced rule proposal to implement disclosures required by Sections 404, 406 and 407 of the Sarbanes-Oxley Act of 2002 ("Sarbanes-Oxley").
CCBN is the global leader in enabling direct communications between public companies and investors over the Internet. In this regard, CCBN builds, manages and hosts the investor relations ("IR") sections of websites for more than 2,000 public companies, including nearly 50% of the Fortune 500, providing in-depth shareholder information through interactive, multi-media solutions. Through its StreetEventsSM institutional event management database (www.streetevents.com), CCBN provides more than 1,300 institutional firms with access to corporate information. Over 15,000 analysts and portfolio managers subscribe to StreetEvents, making it the leading repository of investment-related event information received directly from public companies and investment firms.
CCBN also facilitates the delivery of information about issuers to retail investors by maintaining content licensing agreements with a number of investment portals including America Online, The Motley Fool, Fidelity.com, Forbes.com and Lycos/Quote.com. Through these arrangements, retail investors gain access to corporate event data, conference call webcasts and other financial information that heretofore has been available only to the institutional marketplace.
CCBN's comments are limited to those sections of the proposal meant to implement Section 406(b) of Sarbanes-Oxley, in particular those provisions which address the use of the Internet as a disclosure medium. Section 406(b) directs the Commission to issue rules requiring certain 1934 Act reporting companies to disclose whether or not the company has adopted a code of ethics for its senior financial officers. The section also calls for the Commission to revise its regulations concerning matters requiring prompt disclosure on Form 8-K "to require the immediate disclosure [by filing Form 8-K], dissemination by the Internet or by other electronic means, by any issuer of any change in or waiver of the code of ethics for senior financial officers."
CCBN Supports The Use Of The Internet As A Disclosure Medium For Corporate Information
CCBN is encouraged that Congress has recognized the Internet as a fast, cost effective and efficient medium to achieve disclosure of corporate information to a broad range of corporate constituents. CCBN's experience has been that the use of the Internet to distribute SEC filings and other corporate information is both beneficial to investors and inexpensive for issuers.1 Indeed the Internet is often the only way investors can receive essentially immediate access to press releases and other breaking corporate news, as waiting for news wire services to pick up a story can sometimes lead to unacceptable delays in today's fast-paced environment.
In addition to posting Commission filings and other corporate information on their websites, many issuers are also taking advantage of technology that allows them to notify shareholders and investors, through electronic mail alerts, when new information is posted. As a result of these technological advances, the investing public has more timely access to more information than ever before. The increased use of corporate websites as a distribution medium has leveled the playing field between institutional and retail investors. Therefore, CCBN supports the Commission's proposal to allow use of corporate websites to disseminate information concerning changes to, or waivers of, the code of ethics for senior financial and executive officers.
An Issuer Who Chooses To Provide The Required Disclosure On Its Website Should Not Also Be Required To File A Form 8-K Or Use Other Means To Publicize The Disclosure
As discussed above, shareholders and investors increasingly view an issuer's website as the focal point for important and timely information concerning the company. Congress recognized this fact by specifically approving the Internet as a suitable, stand alone disclosure medium. CCBN believes that requiring an issuer who has already made disclosure of a change to, or waiver of, its code of ethics via its corporate website to file a Form 8-K would add an unnecessary administrative burden. The Commission's proposal to require an issuer to disclose in its most recent Form 10-K or 10-KSB its intention to provide information on changes and waivers to the code of ethics through its website will put interested parties on adequate notice as to where this information may be found. As such, there is no reason to require an issuer who provides the required disclosure on its website to also provide the same disclosure via a Form 8-K.
The Commission Should Not Specify Where And How The Required Disclosure
Our extensive experience in the areas of building, managing and hosting the IR sections of corporate websites leads us to conclude that different designs can be equally effective in conveying important information to interested parties. For example, 300 of the 691 issuers whose CEOs and CFOs were required to file certifications of the companies' financial statements on or before August 14, 20022 are CCBN clients. CCBN collected data on 226 of these companies and determined that of those who posted the certifications to their websites 27% used the IR section home page, 18% used the news release page and 10% used a "bridge" page ahead of their detailed SEC filings page. As this data shows, there are a variety of options to post corporate information that are both appropriate and common. Accordingly, CCBN does not believe that the Commission should dictate where and how a company should place the required disclosure, as long as the information is clearly marked and easily accessible.
While Investors Can Benefit From Continued Access To Corporate Information,
CCBN hosts live and archived analyst conference calls for more than 3,000 corporations each quarter. In a typical quarter, CCBN conducts over 3,500 such webcasts. CCBN's statistics indicate that for every one listener who listens to the webcast live, 3-4 additional listeners will access the archive. There is, however, a diminishing value to information as it ages,3 and keeping too much information on the active section of a corporate website can actually reduce a company's ability to quickly and effectively disseminate timely corporate news.
Fortunately, the Internet also allows for cost-effective storage and makes it easy to maintain a lasting public record of the information. For archived information, CCBN recommends the following to its clients:
CCBN believes that the Commission's proposal to allow a company to remove the required disclosure from its website after 12 months is sound. We also support the idea that the disclosure be maintained and made available to the Commission staff, off-line, for a period of not less than five years. We believe, however, that the proposal should clarify that issuers may use a third-party service provider to maintain the information.
CCBN applauds the Commission's and Congress's recognition of the Internet, and particularly corporate websites, as a viable disclosure medium for corporate information. CCBN appreciates this opportunity to comment on this important proposal.
cc: Hon. Harvey L. Pitt