SEC Web guidelines vex press release services

By Robert MacMillan - Analysis

SAN FRANCISCO (Reuters) - A decision that may allow U.S. companies to use their websites to release market-sensitive information could hurt firms that distribute press releases and give some investors an edge over others.

The Securities and Exchange Commission, in a little-noticed decision last week, said companies could post information about themselves on their websites and blogs, and in some cases skip traditional distribution channels.

The trouble, press release distributors say, is that companies risk running afoul of regulations that require them to disclose information simultaneously and quickly.

Corporate press releases are generally available widely on the Internet, mainly through BusinessWire, which is part of Warren Buffett's Berkshire Hathaway Inc, and PRNewswire, a division of United Business Media Plc.

"When you post information on a website, it's not simultaneously available, and nobody really knows it's there either," said Cathy Baron Tamraz, chief executive of BusinessWire.

The debate revolves around "Regulation Fair Disclosure" (Reg FD), a rule that "material" financial news, such as results, executive changes or criminal investigations, be distributed to the public at the same time and for free.

"You have to really push it out and take steps to make sure that everyone gets their hands on it whether you're the largest institutional money manager at Calpers or if you're an individual investor in Kansas City," said Dave Armon, president of PRNewswire.

For example, thousands of companies release crucial information in their financial results through BusinessWire, PRNewswire and others.

The companies pay the distributors to put out the releases, and can specify such things as timing and the breadth of distribution. In turn, distributors will help check for errors and have controls to try to prevent fraudulent releases.

News outlets like Bloomberg, News Corp's Dow Jones Newswires and Thomson Reuters Corp's Reuters News then write stories about them for their customers and the public. They also distribute the press release feeds.

If companies interpreted the SEC guidelines to say that Web disclosure is enough, under a worst-case scenario they could release the information only on their websites, Tamraz said.

The most recent known example is software company Sun Microsystems Inc, which last year caused an uproar by releasing its quarterly results on its website rather than through the press release services.

SCRAPING FOR NEWS

Hedge funds and other professional investors could keep up with the technology by working with companies that specialize in scraping the Internet for market-sensitive information that may not show up in a filing.

One start-up, SkyGrid, has received an uptick in inquiries since the SEC's guidelines came out, Chief Executive Kevin Pomplun said. SkyGrid is attracting venture capital interest, recently raising $11 million from RRE Ventures and BlackRock Inc.