It remains to be seen whether these and other emerging technologies
are attractive or even appropriate platforms for reporting corporate
information. For instance, Twitter updates, or "tweets," are limited to
140 characters in length, making Twitter seem like an odd fit for
communicating the substance of an earnings call. Nonetheless, many
emerging Internet-enabled communications technologies appear to be
gaining traction as an element of the public company investor relations
toolkit.
And for companies considering integrating these tools into their
investor relations strategies, there are important considerations
related to U.S. securities laws.
The Securities and Exchange Commission's general anti-fraud rule,
Rule 10b-5, applies to all corporate communications, including those
affected via Internet-enabled communications technologies. Companies
must be mindful of at least three potential sources of civil liability
under this standard.
First, the information a company made available must contain no
material misstatements, that is, the information must be accurate in
all material respects. Second, there can be no material omissions in
the information, that is, it must present all facts material to
understanding the information posted. Third, companies cannot engage in
"selective disclosure," that is, they cannot disclose material
information to certain investors or investment professionals without
making this same disclosure on a public basis.
The SEC has stated that as a general matter, it is interested in
promoting disclosure on company Web sites and development by companies
of interactive Web site features. In providing guidance about how to
comply with the anti-fraud provisions of the securities laws in making
available interactive Web site features, the SEC identified two
principles that are equally applicable to emerging communications
technologies: (1) companies are responsible for statements made by them
or on their behalf; and (2) companies cannot require investors to waive
protections under the federal securities laws as a condition to
entering or participating in interactive Web site features.
In addition, the SEC clarified that a company is not responsible for
the statements that third parties post on a Web site the issuer
sponsors, nor is an issuer obligated to respond to or correct
misstatements made by third parties.
Because many Internet-enabled platforms allow for real-time
communication and in some cases impose limits on length and
presentation, compliance with the anti-fraud rules may prove a serious
challenge. Readily foreseeable issues include situations ranging from
inadvertent typographical errors that overstate results to emphasizing
a potentially positive development without noting the associated risks
disclosed in other more complete disclosure materials, such as an 8-K
earnings release or a 10-K annual report.
In addition, the SEC has consistently identified summary information
-- information that is no longer current and hyperlinks in statements
posted by a company to the Internet -- as potential sources of
liability. Communications containing forward-looking statements pose
additional compliance issues as well. To obtain the benefit of the safe
harbor from securities law liability afforded by the Private Securities
Litigation Reform Act of 1995, the forward-looking statement must be
identified as such and meaningful cautionary language must accompany
it. The more flexible standard applicable to oral forward-looking
statements will generally not protect tweets, posts and blogs that are
available on the Internet after the presentation is completed. It will
be a challenge, within the confines of real-time, space-limited
communications, to navigate the safe harbor.
In addition to complying with the general anti-fraud rules,
communications over Internet-enabled communications channels also need
to comply with more specialized disclosure rules. If the communication
includes a non-generally accepted accounting principles financial
measure, Regulation G would apply. Similarly, if the communication
contains any material information regarding the public company that is
not otherwise available to the public, Regulation FD would be
triggered. If the communication is made in proximity to a stockholders'
meeting, the communication may constitute soliciting material subject
to the proxy rules.
Finally, companies listed on a stock exchange, such as the New York
Stock Exchange or Nasdaq, must comply with the exchange's rules
regarding public disclosure of certain information. Disclosure of
important corporate information that could reasonably be expected to
affect the market for the issuer's stock via an issuer's Web site,
blog, social networking profile or tweet may not meet the rules of an
exchange as they are currently interpreted.
A comprehensive set of disclosure policies will need to address
these issues and a host of others, including issues that will arise in
connection with securities offerings and the risk that employee or
third-party communications could be deemed to have been made by or on
behalf of the company. In the face of these challenges, companies
should consider whether the time has come to adopt or update policies
regarding the use of emerging Internet-enabled communications channels
as part of their investor relations strategies.
Alan H. Paley is a Debevoise & Plimpton LLP corporate partner
and co-chair of the firm's securities group. Paul M. Rodel is an
associate with the firm.
The steady stream of emerging Internet-enabled communications technologies, including Twitter Inc., Facebook Inc., MySpace Inc., LinkedIn Corp. and blogs, can pose serious and novel compliance challenges for public companies. 
