The Securities and Exchange Commission continues to try to unravel the Web as it affects financial disclosure. Now it has firmly stated it would hold the contents of a company's Web site to the same standards as all public communications made by a company while in the registration phase of an IPO.
This was just one of the many Internet-related issues tackled in the interpretive release that was effective as of May 4. Specifically, the release said that all content on a company's Web site, and any third-party sites to which it is hyperlinked, should be carefully reviewed to ensure compliance with Section 5 of the Securities Act. The act limits information about an offering an issuer may provide to investors to the content of the Section 10 prospectus, and any permissible communications under available safe harbors.
Securities professionals say the interpretation was long overdue, and gives companies badly needed guidance. "This is an indication that the SEC recognizes that the Internet is changing not only the way most business is conducted, but the way the securities markets are conducted," says Richard Busis, chairman of the securities department at Cozen and O'Connor, a Philadelphia law firm.
Yet the SEC refused to tackle the question of new regulations to facilitate online IPOs, despite the urging of a number of online brokers. Instead, the SEC will "continue to analyze this area as practice, procedures, and technology evolve, with a view to possible regulatory action in the future," according to the release.
Another area that it will continue to analyze is investor discussion forums. Busis feels this is an area of critical importance for businesses and investors, because it is an unregulated medium that can have a significant effect on a company's stock.