Risk & Compliance

Cox Blogs on Reg FD Web Use

The SEC chairman thinks companies can use the internet for widespread dissemination of material nonpublic information—but only on a case-by-case ba...
Stephen TaubNovember 7, 2006

Securities and Exchange Commission Chairman Christopher Cox has embraced blogging. And in what was reportedly his first communiqué via a weblog, he opened the door to discussion of the possibility of using the Web to widely disseminate information according to the dictates of Regulation Fair Disclosure.

“A corporate website is a tremendous vehicle for the broad delivery of timely information,” Cox asserts in a letter addressed to and published as a comment to a Nov. 3 post on “Jonathan’s Blog,” the weblog written by Jonathan Schwartz, the chief executive officer of Sun Microsystems. “The Commission encourages the use of websites as a source of information to the market and investors.”

Cox was responding to a September 25 letter by Schwartz proposing “a new policy” under which online communication of information would fulfill the “broad distribution” requirement under Reg FD. Currently, the rule requires widespread dissemination of material nonpublic information via the filing of an 8-K or “through another method (or combination of methods) of disclosure” if a company has revealed it to certain other parties.

“To date, the SEC has not taken the position that the Regulation’s ‘widespread dissemination’ requirement can be satisfied through disclosure through the web-postings alone. While that may have been a pragmatic approach in 2000, we believe that the proliferation of the Internet supports a new policy that online communications fully satisfy Regulation FD’s broad distribution requirement,” Schwartz wrote to the SEC.

In his blog post, Cox replied that the SEC would interpret such uses of the Web on a case-by-case basis, he left the door open for further discussion. “Assuming that the Commission were to embrace your suggestion that the ‘widespread dissemination’ requirement of Regulation FD can be satisfied through web disclosure, among the questions that would need to be addressed is whether there exist effective means to guarantee that a corporation uses its website in ways that assure broad non-exclusionary access, and the extent to which a determination that particular methods are effective in that regard depends on the particular facts.”

But the SEC chairman left the door open for further discussion of Schwartz’s plan. “The Commission encourages the use of websites as a source of information to the market and investors, and we welcome your offer to further discuss with us your views in this area,” Cox wrote.

Schwartz regularly posts on his blog, which has generated a large following. In his letter, Schwartz pointed out that Sun’s website gets an average of nearly one million hits per day.

Schwartz also claims that his blog attracts 50,000 viewers a month. He says it has become “the single most effective vehicle to communicate” with investors, journalists, and analysts.