- Website Posting of SEC and Corporate Governance Materials: Required Postings and Practical Advice
- March 15, 2004
- Law Firm: Perkins Coie LLP - Seattle Office
In recognition of the central role of the Internet in today's global economy, many companies rely on their corporate websites as basic information sources and marketing tools for business partners, customers and the general public. In an environment in which public disclosure is increasingly required or requested, companies are also using their corporate websites as bulletin boards for posting SEC filings and corporate governance materials.
In recent years it has become standard practice for a public company to create within its corporate website a separate page devoted to investor relations. This page usually provides access to SEC filings, either directly or through links to the EDGAR database of the SEC's website or to third-party service providers that post SEC filings. However, in light of increased attention to corporate governance matters and recent SEC and NYSE corporate governance requirements, many companies have now taken this practice a step further and created separate web pages devoted exclusively to corporate governance matters, such as information about the board of directors and committees.
This Update summarizes SEC, NYSE and Nasdaq rules relating to website posting of SEC filings and corporate governance materials and provides some related practical advice.
SEC Reports and Information
SEC rules and regulations require website posting of periodic and current reports, Section 16 reports, Regulation G disclosures and other information.
SEC Periodic Reports on Forms 10-K and 10-Q and Current Reports on Form 8-K
In 2002 the SEC began requiring accelerated filers to post Forms 10-K, 10-Q and 8-K, and amendments to these reports, on their corporate websites and to make them available free of charge to the public or to explain in their annual reports why they do not so provide these reports. Website postings of these periodic and current reports should be made the same day as the reports are filed with or furnished to the SEC. Each accelerated filer must also include in its Form 10-K its website address, if any. Accelerated filers are U.S. reporting companies with a public float of at least $75 million, that have been subject to the reporting requirements under the Securities Exchange Act of 1934 for at least 12 months and that previously have filed at least one annual report under the Exchange Act.
Companies may provide access to these reports by posting hyperlinks to the EDGAR database of the SEC's website or to third-party services that post these reports so long as public access is free of charge and readily available in a timely manner. All related exhibits and schedules filed with the SEC should also be accessible from the company's corporate website and, although not required, the SEC has encouraged companies to also post information incorporated by reference in these reports. The SEC recommends that these reports remain posted for at least 12 months.
SEC regulations adopted under the Sarbanes-Oxley Act of 2002 require reporting companies that maintain corporate websites to post on their websites beneficial ownership reports on Forms 3, 4 and 5, including all exhibits and attachments, filed by company officers, directors and more than 10% beneficial owners. The website posting must be made by the end of the business day after the date the report is filed with the SEC. Companies may satisfy the requirement by providing access to reports directly or by hyperlinking to the websites of third-party service providers (including the EDGAR database on the SEC's website) if specified easy-access conditions are satisfied. Each report must remain posted for at least 12 months. You can find more information about these Section 16 reporting requirements in our May 28, 2003 Corporate Finance Update.
Regulation G Compliance
SEC Regulation G, which became effective in March 2003, requires that public disclosures of any material information that includes a non-GAAP financial measure must be accompanied by a presentation of and a reconciliation to the most directly comparable GAAP financial measure. If the non-GAAP financial measure is released orally or telephonically or by webcast, broadcast or other similar means, the company may provide the Regulation G information and reconciliation by:
- posting the information on the company's website; and
- disclosing the location and availability of that information during the presentation.
The SEC recommends that any non-GAAP financial information remain posted for at least 12 months. You can find more information about Regulation G in our February 5, 2003 Corporate Finance Update.
Earnings Information for Completed Fiscal Periods
Item 12 of Form 8-K, which became effective in March 2003, requires companies that issue earnings releases or disclose other material nonpublic information regarding completed annual or quarterly periods to furnish this information on Form 8-K within five days after its public announcement. Form 8-K includes a "safe harbor" exemption that allows an oral, telephonic or webcast communication -- typically an earnings call -- to proceed promptly after a Form 8-K filing of the earnings release, without the need to furnish a transcript of the call on a subsequent Form 8-K, even if the communication contains material nonpublic information about the completed earnings period. The safe harbor is available if:
- the communication complements, and occurs within 48 hours after, the related written release furnished on Form 8-K;
- the company pre-announces the earnings call by a widely-disseminated press release, and makes the earnings call broadly accessible to the public by dial-in conference call, webcast, broadcast or similar means; and
- the company posts on its website the previously undisclosed material financial and statistical information contained in the presentation, together with any information required under Regulation G.
The SEC has indicated that a company may satisfy this website posting requirement by:
- providing through the company's website public access to an audio file that contains all such material financial and statistical information not disclosed prior to the presentation; or
- posting on the website before the time of the presentation slides or a presentation that contains such information.
Material information disclosed unexpectedly in response to a question and answer session must be posted on the company's website promptly after its disclosure. The SEC encourages companies to provide access to these website postings for at least 12 months.
Regulation FD Compliance
Regulation FD (fair disclosure) prohibits a public company from selectively disclosing material, nonpublic information to market professionals, such as broker-dealers and analysts, or to its investors if it is reasonably foreseeable that investors will trade based on the information. Material information must be broadly disclosed by the company to the public by filing a Form 8-K or through other prescribed methods, such as a press release, that will provide broad, non-exclusionary distribution of the information to the public. A company may use its website as part of the broad disclosure process, although a website posting alone is insufficient. You can find more information about Regulation FD in our September 1, 2000 and December 11, 2002 Corporate Finance Updates.
Corporate Governance Materials and InformationDirector Nomination and Shareholder/Board Communication Information
In November 2003 the SEC adopted rules requiring public companies to disclose information regarding their nominating committees and procedures by which shareholders may communicate with company directors. The rules became effective January 1, 2004, and generally require disclosure in the company's proxy statement first distributed to shareholders on or after that date. The SEC rules provide that:
- If the company's nominating committee has a charter, the company may post a current copy of the charter on the company's website and indicate in the proxy statement that the charter is available on the website and the website address. (If the nominating committee has a charter and does not post a current copy on its website, the company must include the charter as an appendix to its proxy statement at least once every three years.)
- Rather than include the following shareholder/board communications information in its proxy statement, a company may post it on its website (and indicate in the proxy statement that the information is so posted and its website address):
- the manner by which shareholders may communicate with board members;
- the manner in which the company determines which communications will be forwarded to board members (but this disclosure is not required if these procedures have been approved by a majority of the company's independent directors); and
- the company's policy about director attendance at annual meetings, and the number of directors who attended the prior year's annual meeting.
You can find more information about the director nomination and shareholder/board communication rules in our December 4, 2003 Corporate Finance Update.
SEC Code of Ethics Disclosure
New Item 406 of SEC Regulation S-K requires a company to disclose in its annual report filed with the SEC whether it has adopted a Code of Ethics for its principal executive officer, principal financial officer and principal accounting officer or controller (or persons performing similar roles), and, if it has adopted a Code of Ethics, it must make it publicly available by:
- filing a copy as an exhibit to the annual report;
- indicating in the annual report that the company will provide a copy free of charge to any requesting person and providing instructions on how to make a request; or
- posting a copy on the company's website and indicating that fact and the company's website address in the annual report.
Companies may include a Code of Ethics for the listed officers in a more general employee code of conduct, in which case companies need only disclose publicly the SEC-required portions to satisfy these requirements.
Amendments or waivers of the Code of Ethics that apply to the listed officers must be disclosed publicly by either:
- posting the information on the website, if the company has disclosed in its most recent annual report its website address and its intention to so disclose these items; or
- filing or furnishing the information on Form 8-K with the SEC.
Any amendments or waivers posted on the website must remain posted for at least 12 months. You can find more information about Codes of Ethics in our February 5, 2003 Corporate Finance Update.
New York Stock Exchange and Nasdaq Corporate Governance Rules
In November 2003 the SEC approved new NYSE and Nasdaq corporate governance rules. The NYSE rules require listed companies to adopt and post on their websites:
- Charters for the "most important" board of directors' committees, including at least for the audit, compensation and nominating/corporate governance committees;
- Corporate Governance Guidelines; and
- Code of Business Conduct and Ethics for directors, officers and employees.
The content of these items must conform with the NYSE rules. The company's annual report filed with the SEC must state that these items are accessible on the company's website and also available in print to any requesting shareholder free of charge.
Nasdaq likewise requires listed companies to adopt and publicly disclose charters for the audit, compensation and nominating committees and a Code of Conduct for directors, officers and employees that also complies with the SEC Code of Ethics requirements. A company can satisfy the Nasdaq public disclosure requirement by posting these documents on its website and stating in its annual report filed with the SEC that the documents are available on its website and the website address.
Like the SEC requirement that companies disclose waivers and amendments of the SEC Code of Ethics, NYSE and Nasdaq rules require public disclosure of waivers and amendments of a company's general code of conduct as it relates to any director or executive officer.
Generally, companies must comply with the new NYSE (and most of the Nasdaq) corporate governance standards discussed in this Update by the earlier of October 31, 2004, and their first annual shareholders meeting after January 15, 2004. You can find more information about NYSE's and Nasdaq's corporate governance rules in our December 1, 2003 Corporate Finance Updates: SEC Approves Final NYSE Corporate Governance Standards and SEC Adopts Final Nasdaq Corporate Governance Rules.
Application to Foreign Private Issuers
Foreign private issuers are excluded from the definition of accelerated filers and generally are not required to file Section 16 reports, Current Reports on Form 8-K or SEC-compliant proxy statements. Accordingly, they are exempt from the SEC requirements discussed above relating to:
- website posting of periodic and current SEC reports;
- website posting of Section 16 insider reports;
- furnishing earnings releases on Form 8-K; and
- proxy disclosure of director nomination and shareholder/board communication procedures.
However, revisions to Forms 20-F and 40-F include provisions similar to those for domestic filers that require the adoption and public disclosure of a Code of Ethics.
The NYSE corporate governance rules allow foreign private issuers to follow home country practices rather than most, but not all, of NYSE's corporate governance standards if they disclose the significant ways in which their corporate governance standards differ from those required by the NYSE, either in their annual report to shareholders or on their website if they disclose the website disclosure and address in their annual report to shareholders. However, Nasdaq does not automatically exempt foreign private issuers from its corporate governance rules, but rather permits a foreign private issuer to petition Nasdaq and obtain an exemption from these rules if they would require the company to do anything contrary to the laws, rules, regulations or generally accepted business practices of its home country.
Practical Tips on Use of Corporate Websites for Corporate Governance Purposes
For companies that want to adopt good practices relating to website postings of SEC filings and corporate governance materials, the following suggestions may prove helpful:
- Link your corporate governance web page directly from your corporate website home page or, at a minimum, from your investor relations web page, with a link labeled "Corporate Governance." Make the link to the corporate governance materials as prominent as the link to the investor relations page (if the link is included on your home page) or as other materials available on the investor relations page (if located there), so that investors can navigate easily to the corporate governance materials. See Hewlett Packard's investor relations page for a good example of how this can look.
- Ensure that "printable" versions of the materials on your corporate governance web page and on the SEC portion of your investor relations page are available online. Provide these materials in multiple common formats (i.e., as a separate web page and as Microsoft Word and Adobe® PDF files) to facilitate downloading and printing.
- Provide access through the SEC portion of your investor relations page to all electronic SEC filings by the company, not only those currently required to be posted by any applicable SEC rules -- even if you are not an accelerated filer (and be sure to provide direct hyperlinks as required by SEC rules for Section 16 filings).
- For other SEC filings, consider hyperlinks to websites offering enhanced versions of EDGAR, such as EDGAR® Online, freeEDGAR® or LIVEDGAR.
- Even if your company is not listed on NYSE, post on your website charters for your audit, compensation and nominating/governance committees, as well as your code of ethics/conduct and any corporate governance guidelines adopted by your company.
- In addition to items required to be posted by SEC or NYSE rules, consider posting additional materials on your corporate governance web page, such as:
- List of directors, including their biographies and photographs;
- List of board committees, including names of members and brief descriptions of committee purposes;
- Copies of certificate or articles of incorporation and bylaws;
- Description of how investors can contact the board of directors; and
- Any other policies the company wishes to make public (e.g., information that may positively affect your corporate governance ratings).
- Place a date on the materials posted, including committee charters, code of ethics/conduct and any corporate governance guidelines. Publish the date when the web page was last updated, and use appropriate disclaimers (e.g., "The information posted is as of the date indicated and, to our knowledge, was timely and accurate when posted. We are under no obligation to update or remove outdated information other than as required by applicable law or regulation.").
- After a brief period, archive the SEC materials on the web page with appropriate disclaimers on the investor relations pages of your website.
- Schedule regular reviews of posted materials to determine if they have become outdated or inaccurate (it may be helpful to schedule this for a periodic date). Replace amended corporate governance information and materials such as charters, codes, corporate governance guidelines and board information. Regular review and updating and archiving or deletion of stale information ensures compliance with applicable rules, maintains credibility with website users and provides current information for investors and corporate governance rating agencies.