by Mike Masnick

Sun CEO Demonstrates How His Blog Qualifies As Public Disclosure... Not Sure About Others

from the what's-the-big-deal? dept

A month ago, Sun CEO Jonathan Schwartz posted on his blog about how he was petitioning the SEC for clarification on fair disclosure rules. Fair disclosure rules are designed so that companies that have "material" news need to disclose it equally and fairly so that no one person or organization has an advantage (i.e., can trade on the information) without others being able to find the same info. Schwartz was complaining that the regulation required them to do a combination of things such as a press release or a conference call, when a simple blog post might suffice. Of course, the regulations have never been that clear, as they seem to basically say that adequate disclosure may depend on the method, but there's no set of things you must do. In other words, it's not entirely clear what kind of clarification can be made since it seems like the issue has little to do with the form in which the info is released, but whether or not whatever form it is is accessible and likely to be seen by enough people. So, now that the SEC has responded by suggesting that sure, blogs could be okay if they are clearly going to be seen and accessible, the press has turned this into a "blog" issue, about how blogs can be used for disclosure. However, that's not quite right and it's not what the SEC indicated. What they basically said was that the medium doesn't matter, the impact does. In the case of Sun, Jonathan Schwartz's blog is widely read by the press -- and thus, if he makes a statement, it will get picked up rapidly (as this very story did!). So, it makes sense that a blog post from him (in combination with other disclosure methods) is perfectly fine. However, for some random company with a blog no one reads, it's clearly not at all sufficient. In the end, this isn't a blog issue at all. The medium has nothing to do with it -- only the likelihood of the disclosure being noticed and accessible to all.

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  • identicon
    Frank J. Mattia, 7 Nov 2006 @ 9:36pm

    Have we all forgotten the third law of advertising

    3: The medium is the message.

    There, it clearly says it. Right there in the rule book.

    reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 8 Nov 2006 @ 12:34am

    There should be some more serious rules...

    ... for a blog used for this kind of disclosure. I can easily see a way the blog software could be manipulated to present different information to different people on purpose for a short window of time. Sure eventually the content would have to be the same for everyone, but there would still be plenty of opportunity for the kind of misuse the FD rules aim to discourage.

    The thing about a press conference or press release is that once it's delivered, it's not easily pulled back and changed.

    If the blog were run by an independent third party that maintained a tamper-proof change log that anyone could investigate and verify then perhaps it would be more suitable for this.

    reply to this | link to this | view in chronology ]

  • identicon
    Kristen Forbriger, 8 Nov 2006 @ 1:12pm

    A happy medium

    I agree with your assessment. The focus of the SEC reg is on the end, not the means. However, must every company ask permission to use anything other than the old-school release?

    Public companies waste too much time and resources on this process, and the only winners are the wire services. Check out my recent post on the disclosure process at http://tinyurl.com/ydu4s4.

    While blogs might not be the answer for every company, perhaps it's time for the leaders to set a new standard.

    reply to this | link to this | view in chronology ]

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