Legal issues of corporate blogging – more on Sun and SEC Regulation FD

2006 October 7
by Cornelius

Law professor Allison Garrett (scroll down for her bio) has a post on her blog discussing the letter recently sent by Sun’s Jonathan Schwarz to SEC chairman Christopher Cox (see my earlier entry, Jonathan’s letter). Being a law expert, her perspective is different (read: more sober and realistic) than that of most bloggers, including myself:

I can see a few problems with allowing blogs to be considered compliant with Reg FD, but there may be ways around the problems. Here are some of the issues the come to mind:

1. How will investors know whether a blog is legitimately the CEO’s blog?

2. How can the CEO’s blog (which would perhaps be deemed Reg FD compliant) be distinguished from the software engineer’s personal blog that also addresses company issues?

3. Are RSS feeds reliable enough for journalists and serious investors?

4. What is the security of the blog? Could others access the CEO’s blog in some way and post messages there?

5. What if “false and misleading information” is posted in a blog? Who, besides the CEO, would have liability for the information? The audit committee might review 10-Qs prior to filing; it would have neither the time nor the inclination to review blog postings.

6. If the information is truly material, it seems that one way for the company to flag this is to make a filing on a Form 8-K. Otherwise, investors just have to guess about whether the information is material.

7. If CEOs take to blogging, they may have to give up one of the most attractive features of blogging — the ability to sort of think outloud in a candid manner. After all, an unguarded comment of the type that we bloggers make from time to time, could be career limiting.

All of these problems are either of a technical nature or related to how trustworthy blogging is as a new form of publishing. Of course, if you ask bloggers none of this is an issue, but from the perspective of the non-blogging part of the population – which still makes up the majority – things look different. Still, I can come up with a few arguments, even if it’s just from a layman’s point of view:

1. The security and verifiability of a blog is no different from that of a corporate web site in general.

2. The authorship of a blog can be verified by embedding it accordingly in the overall web site structure – if it’s located under “Company” – “Blogs” – “CEO’s blog” it is hardly plausible to assume it belongs to someone other than the CEO.

3. “False and misleading information” in a blog entry is no different from “false and misleading information” published in an interview or newspaper article (this doesn’t rule out the possibility that they might by treated differently in a legal context though).

4. Propagating information through RSS is arguably more effective than any other form of distribution. No, I don’t think that one sticks.

5. “Unguarded comments”, when made by politicians or corporate leaders, have the potential to be “career-limiting” whether they’re made at fund raisers, in interviews or posted in a blog.

Anyone with legal expertise (or without) want to pitch in?

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