Private firms face few regulations governing public statements, so communication missteps aren’t likely to violate laws and spur law enforcement actions.
For public companies, quite the opposite is true. There are legally binding rules in place, and a failure to comply with them can have serious consequences. As a result, it is vitally important that companies provide their employees with substantive training.
Now that we’ve explained why your employees need to be trained on Wall Street communication, let’s turn to the “who, what, where, when, and how” of a successful instructional initiative.
Who should be trained to speak? The answer here may surprise some, given that most, if not all, companies authorize only select members of their teams to communicate with the public and Wall Street. These individuals generally include the chief executive, the chief financial officer, and the professionals in investor relations and public relations.
That’s as it should be. Nevertheless, companies should also provide some training to everyone.
Ideally, this training and the resulting understanding will become part of a company’s culture. This is important for a number of reasons. First, there is obviously great value in having a company’s total workforce on the same page. Not so obvious, perhaps, is that analysts, investors, reporters, and others sometimes fish for corporate information outside of the pool of authorized communicators. Training will not only prepare staffers for such attempts, but also enable them to understand why they need to be so circumspect. Policing this is tough, so pre-emption is strongly preferred.
What should employees be trained on? Training sessions and materials should explore “material non-public information” and “Regulation FD.” Material non-public information is simply significant information (the development of a new product or clinical trial results, for example) that your company has yet to make public in a federal filing, press release, or some other widely available pronouncement. Distributing such information selectively rather than simultaneously to the public at large is a legal violation that can result in charges of insider trading. Regulation FD (full and fair disclosure), according to the U.S. Securities and Exchange Commission, “provides that when an issuer discloses material nonpublic information to certain individuals or entities … the issuer must make public disclosure of that information.”
Where and how should training take place? We recommend that companies first present this training at an all-employee “town hall” meeting and then include related materials in the company policy manual.
When should training take place? The best time to conduct the all-employee town hall training session is before a company goes public. The related materials should then be included in every iteration of the updated company policy manual.
Two more points regarding compliance:
1. Stay on script. One of the most effective methods for remaining in compliance when it comes to communicating effectively with Wall Street is to produce a script for the authorized communicators that has been vetted by counsel — and then to stick to it. Do not deviate or extemporize.
2. Prepare thoroughly for Q&As. Whatever the event, whether it is a conference call or the announcement of a new product or FDA decision, prepare for the Q&A session. Anticipate the questions, prepare responses, have those responses reviewed by counsel, and practice the delivery in a mock session or two.
At Westwicke, we’re ready to provide the assistance you may need to fulfill your objectives and flourish, so reach out for a conversation.