Disclosure Policy Tips for Publicly Traded Companies
For publicly traded companies, successfully communicating information to shareholders and the public depends on the efforts of all employees. That’s why they need a written public disclosure policy that assigns responsibility for the collection and assessment of information, and specifies who will communicate that information and when.
A disclosure policy will help ensure that information is disseminated promptly, credibly, and in compliance with legal and regulatory requirements, including the SEC’s Regulation Fair Disclosure (Reg FD). Reg FD will guide many of your disclosure practices.
A good disclosure policy will also help develop and maintain realistic investor expectations by making all required disclosures on a broadly disseminated basis, without being unduly optimistic or pessimistic on the company’s prospects.
Here’s some help in developing your company’s disclosure policy.
First, establish a disclosure policy committee that is responsible for considering the materiality of information and determining disclosure on a timely basis, as well as setting insider-trading policies and assuring compliance with applicable disclosure laws and regulations. At a minimum, the committee typically consists of the chief financial officer, the SEC/legal counsel and the company’s investor relations counsel.
The committee will work with the authors of all disclosure communications to ensure accuracy and message consistency, and will review the method of communication being used to disclose any non-public, material information to assure that it is communicated in the most appropriate manner. The disclosure policy committee should review all SEC filings, material corporate press releases, the annual report, the 10Q, slide presentations to the investment community, and other external communications prior to their use to ensure the goals established by this policy are met.
Next, assign who will be authorized to communicate on behalf of the company. We suggest that you limit the number of spokespersons. Others within the company may be designated on occasion to respond to specific inquiries from the public as necessary or appropriate. However, until that determination is made, inquiries should be directed to designated spokespersons. It is essential that spokespersons be apprised of all material company developments so that they are able to evaluate and discuss those events that may impact the disclosure process.
What should be covered in the disclosure policy? Important topics to cover include:
- A routine procedure for drafting and disseminating all material corporate communications, including press releases.
- A quiet period beginning when the company’s financial results become reasonably apparent and ending when the quarterly results are released. During that time, the company may not want to comment on earnings or provide any additional earnings guidance.
- Your policy on responding to stock market activity.
- Your policy on responding to rumors.
- Your policy on non-intentional disclosure.
- Your policy on commenting on analysts’ earnings estimates and stock recommendations.
If yours is a publicly traded company, the execution of a disclosure policy will ensure that you abide by applicable rules and regulations, and it may help, over the long term, improve market valuation, increase liquidity, strengthen company credibility, and enhance shareholder value.
For a deeper conversation about what to include in your disclosure policy, fee free to reach out.
Peter Vozzo is a Managing Director on Westwicke's life sciences, healthcare services, and healthcare technology teams. He has extensive experience in investor relations. He has a BS in chemistry and an MBA in finance/accounting, both from the University of Connecticut.
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