You've lost the news

Prepare yourselves for the salesmen. The slow process of reviewing the way in which UK companies disclose financial news is lumbering toward a conclusion and all signs point to the Financial Services Authority throwing open the system to competition. That means a whole host of news disseminators are going to come knocking at your door.

Instead of forcing companies to release news through the Regulatory News Service (RNS) the FSA is likely to nominate several 'licensed' news providers to do the job. It will then be up to companies to choose one of the select few named providers to do the task for them. PR Newswire, Business Wire and Hugin have been revving up their engines in preparation and the RNS, under the auspices of the demutualized London Stock Exchange, will also throw its hat into the ring in some fashion.

Ringing the changes

The LSE's decision to demutualize back in 1999 set alarm bells ringing at Her Majesty's Treasury. It was felt that it would not be appropriate for an independent company to control the listing authority for UK companies - hence the move of those powers to the FSA and the start of a long consultative process on how best to approach the disclosure issue.

Then there's the increasing importance of internet-based audiences, predominantly retail investors, and a longstanding frustration with the RNS among financial PR practitioners. That dislike was based on its anachronistic technology and lack of responsiveness to corporate needs, both of which were blamed on the monopolistic nature of the LSE's system. At that point, releases had to be sent through to the RNS in the cumbersome ASCII format which did not even recognize pound signs. As a result, several financial public relations practitioners were lobbying for change way before the LSE's decision to demutualize.

Ensuring that the UK moves towards a more efficient, faster news dissemination system has been anything but efficient and fast. Two years into the consultative process the FSA's Information Dissemination Advisory Group (IDAG) is expecting to receive a draft paper with a view to the final consultation being opened up in mid-April or early May. The process could be further delayed, however, by the recent resignation and impending departure of Paul Geradine, head of the listing authority at the FSA.

Canadian option

Sources suggest that the FSA is currently favouring the Canadian competition model in which a number of professional news disseminators are granted a license to distribute official releases rather than the virtual free-for-all of the US. Under this system companies would upload their releases to the licensed disseminators who then ensure they reach a pre-determined range of other networks such as Reuters, Bloomberg and a slew of financial web portals.

One of the key questions is the cost for listed companies. To date the RNS fees have been absorbed into the overall cost of maintaining a listing but once this is opened to competition that figure will be stripped out of the total, allowing companies to pay the fees demanded by the provider of their choice. The Financial Times ran a couple of scare stories along these lines in January this year, intimating that the cost of information dissemination could spiral, particularly if it is based on a per-word, per-release basis as some providers are proposing.

FSA spokesman Patrick Humphris is keen to scotch any such talk. Although he will not officially confirm that competition is a given - he points out that the FSA could still decide to take on the role of information disseminator - he agrees that any competitive element could be expected to reduce the cost of information dissemination. 'Competition isn't guaranteed but it is no secret that it is a favored model because in theory it should provide benefits for everyone. If we move away from the RNS then the cost would be stripped out from the total listing fee. We've really focused on ensuring that the costs for listed companies do not increase.' He adds that the security of any final option is also key.

Despite the FSA trying to maintain the illusion that other options are still on the table, it is clear from others privy to the process that the decision to follow the Canadian model has already effectively been made. That said, it is also clear that the noise from information disseminators jostling for position before the race has ruffled a few feathers within the FSA. One of those involved in the discussions suggests that 'certain companies, which shall remain nameless, have jumped the gun.'

Look at us

It is fairly obvious who such comments are directed against. PR Newswire has probably been the most active on the circuit, touting its capabilities to satisfy disclosure requirements once the process is opened up to competition. Mind you, its competitors such as Business Wire and Hugin have not been far behind. Business Wire announced in January that it is opening up a London office, making little secret of its intention to muscle in on the disclosure market. And Paul Herbert, sales director at Hugin, boasts that as far as he is aware his company was the first to submit its product details to the FSA as a potential licensee.

Mark Hynes, director of UK disclosure at PR Newswire Europe, is not ashamed of the direct approach he has taken, noting that it takes time to get such systems up and running. He intimates that the FSA cannot expect to click its fingers at the end of the consultation process and expect commercial operators to be ready for action unless they have done a bit of talking to and wooing of clients in the meantime.

By the time this article is published, PR Newswire will have launched its originally- titled Disclose product into the UK market at the Investor Relations Society annual conference on March 28. Hynes says that it will go ahead regardless of the outcome of the FSA's decision, although he concedes that in the longer term its ability to pull in the revenues will be affected by the consultative paper. PR Newswire Disclose can operate under the current environment by supposedly making it more user-friendly for companies to send their releases through to the RNS. It is simply a matter of walking through a web-based form and attaching a Word document or whatever other format your releases are created in. PR Newswire will then transform it into ASCII and allow users to OK the final release over the web before sending it through to the RNS.

This is just a precursor to the final system, though, which envisages PR Newswire accepting releases from corporate clients and then distributing them as an official news disseminator. Like the competition, the idea is that PR Newswire can then 'sell' extra distribution channels and features to clients. Want your release to go out to analysts in Germany too? Hey, no problem. And what about a webcast to run alongside the release? You know it's all the rage. Ker-ching, ker-ching. The pounds will just roll in - well, that's the idea.

Caution reigns

Business Wire has similar capabilities but remains a little more guarded in its approach. 'We plan to enter the market regardless of the outcome of the FSA situation,' says Gregg Castano, VP of global sales, in an official statement. 'But our approach will definitely be impacted by the outcome of that decision. We hope to and are fully equipped to be part of the disclosure solution, but we cannot comment further until the consultation paper is circulated.'

Castano opens up a little more once it's made clear that his competitors are talking, explaining that he feels the UK market is now ready for wider distribution options over and above the official disclosure levels. That is where Business Wire is hoping to make the cash. He confirms that, presuming the FSA goes down the competitive route and Business Wire gains a license, costs for official disclosure would be kept to a minimum. 'We'll be very competitive price-wise.'

Hugin's product is also aimed along similar lines but Herbert claims it will be 'quicker than everyone else's' because they will be using a fully automated process rather than editors, like other services. 'We'd reformat automatically. The client would have access to a web interface and then they upload the release to us.'

Expect more claims like this - coupled with counterclaims - in the months ahead. It's clear that all the service providers are keen to make what are essentially similar products stand out from the competition. The trouble for them is few IROs will care about the intricacies. The real determinants will be depth of official distribution, cost and the add-on services or distribution that a provider can offer.

It is the latter point that might leave the old RNS foundering - or maybe it will make it stand out. The London Stock Exchange confirms that it is intending to offer its own disclosure service should the FSA accept it under a competitive environment. That would be largely based on the current RNS with some extra commercialization of the service in order to compete. John Wallace, a London Stock Exchange spokesman, says, 'We would welcome a competitive environment and believe it will reveal the true value of the service.' He adds that they hope to differentiate themselves as a disseminator of regulatory news only. 'Then it is not diluted by all sorts of other news along the way. When someone reads it they know it is an official release.'

Of course, conspiracy theorists believe that the slipping schedule of the FSA's consultative process is simply a ruse to give their old friends at the LSE more of a fighting chance in developing a system to face the competition. Not surprisingly that is flatly denied by both the LSE and the FSA. 'Before we produce a consultation paper we've got to do a lot of legwork,' says Humphris at the FSA, adding that the slip of a 'month or two' from the revised schedule is 'simply a matter of us putting together a wider-ranging document.'

IROs should use the time to prepare for the salesmen.