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Oct 08, 2015

Viewpoint: Goldman's disclosure switch is a step backwards

Bank will release results via website and Twitter

While we admire its effort to innovate, Goldman’s decision not to use a wire service to disseminate its upcoming earnings but instead to disclose results via its website and Twitter seems a step backwards for full, fair and simultaneous broad disclosure. Goldman’s choice of ‘pull’ over ‘push’ in material disclosure seems to go against the spirit of Reg FD – even if the SEC has condoned the practice.

Companies looking to follow Goldman’s lead should consider the following:
•Do investors prefer to fetch earnings news from each company’s website, or to access all company earnings in real time via their preferred financial portal/data source?
•Isn’t it easier and better to use a wire service to push material earnings data to all relevant sites/services used by investors in real time?
•How do Goldman’s financials get onto all the major financial portals and databases relied upon by most investors? When is this accomplished?
•What data integrity safeguards exist in getting Goldman earnings content onto other investment information portals/services?
•How do you confirm the time disclosure has been achieved and determine the time when you can push your data out via email and other sources?
•Is your website secure and sufficiently robust and easily navigable to provide immediate access to all investors in real time?
•Is your web team able to accomplish such disclosure efforts and if so, at what cost relative to the alternative?
•Are you 100 percent confident your site cannot be compromised before, during or after your material disclosures? Are you comfortable in taking on any liability related to managing this function?

While industry leaders can get away with making a process more time-consuming and less investor-friendly, does that apply to your business? What would the world look like if all companies followed Goldman’s approach and investors had to go to each company’s website to get material earnings news? It would certainly be good for driving EDGAR traffic.

Does a 140-character tweet have a real place in disclosing material information when the source material is initially available on just one website? What about unplanned material news, which is quite different from normally scheduled earnings reports: does the website/tweet model provide suitable disclosure breadth and speed?

And in the end, what does Goldman really have to gain from this approach, besides wire service cost savings (offset by the cost of in-house efforts) and publicity for it and its corporate finance client Twitter?

While the incidence of high-profile online security breaches continues to grow and no site seems immune ‒ even the wire services ‒ the problem isn’t wire service disclosure; the problem is security. Our sense is that the wire services are spending a lot more time and money on addressing those risks than most corporate or IR sites, and their speed and breadth of reach is really not beatable.

The concept of moving the source of your disclosure from a wire service that reaches hundreds of mainstream financial websites simultaneously to your own website is hard to understand, particularly when you also consider how this action could relocate the risk and potential liability of any disclosure mishaps directly to your company.

What we learned this afternoon from speaking with industry colleagues is that to address the disclosure limitations of its website, Goldman plans to provide ‘advance copies’ of its news announcement to several media sources prior to its formal disclosure, though we were not privy to how long in advance or what those media sources are. This effort seems intended to help these media points digest and report the earnings news while at the same time acknowledging the limitations they would face if they had to pull the news from the website along with everyone else.

While this practice is allowed under the Reg FD ‘media carve out’, it does seem a counterintuitive security strategy when it spreads disclosure risk across a greater number of points rather than one central location. Fairness, equal access to the news and sensitivity to investors’ needs and the value of their time do not seem as well served with this new model ‒ but we’ll see how it works over the coming quarters.

David Collins is managing director of Catalyst Global, a New York-based IR and corporate communications firm

This article first appeared on Catalyst Global's blog