Microsoft Makes Regulatory Financial Filing History
Microsoft announced that it would cease to distribute its earnings release through newswires, "although in the future it may choose to issue other financial-related news via newswire in addition to the Web site," as a company press release said.
Although at most a side note on the company's earnings announcement due today, it an example of a major change in U.S. regulatory compliance. So far as I know, it's the first company to announce a break with the practice of using wire services to distribute press releases about financial news.
In 2000, the Securities and Exchange Commission created the fair disclosure regulation, otherwise known as Regulation Fair Disclosure (more commonly Reg FD), to ensure that public companies released material information in a way to ensure that everyone had access to it at the same time. The reason was concern over selective disclosure in which only select analysts or institutional investors would get pertinent financial information in advance, freezing out the public and the media.
One of the methods that has been common is to file press releases on newswires so that the press and interested individuals could in theory get the information as quickly as any insider. The releases were often in addition to SEC 8K filings, although, technically, a company could do one or the other.
The irony is that the change happened at the time that Internet use was exploding. However, the SEC did not want to allow companies to simply post information on their web sites because Internet access was still far from universal.
Even as use increased, there was no clear rule to say that placing information on a company's web site would have enough impact as to eliminate the need for other types of distribution. Even as recently as two years ago, corporate lawyers and former SEC officials told me that no companies had yet met the SEC's criteria for having enough impact. In theory, to reach that point, the web site would have to do the following:
- be well-trafficked by investors
- offer enough relevant information
- be easy to use by investors
Who are the really big winners? Such companies as Thomson Reuters and Shareholder.com, which, for a fee, create and maintain investor web sites for public companies.
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