When is a company responsible for a particular Web site?
Can a company have securities law liability for all of the content on its Web site?
Can a company use marketing information for its products and services on its Web site without incurring securities law liability?
Is a company responsible for content on its Web site provided by a third party?
Can a company be held liable for content provided to a third party for its Web site?
What types of legal risks does a company have for its Web site?
Are companies being sued for their Web site content?

B. Disclaimer Use on Corporate Web Sites

How do companies typically provide Web disclaimers?
How many Web pages within a corporate Web site typically contain Web disclaimers?

C. Updating Web Site Content

Do companies have a duty to update content on their Web site?
What do critics of the duty to update online information say (if there is any such duty)?
Do companies have a duty to correct content on their Web site?
Does a company have a duty to update information for which it did not have a duty to disclose?
Is there a difference between a duty to update and a duty to correct?
For how long does a company have a duty to update (if such a duty exists)?
How can companies comply with a duty to update (if such a duty exists)?
What are the best ways to date content to reduce the likelihood that a company has a duty to update?
Is a date in the byline of a posted press release sufficient to avoid a duty to update?
Does similar content with a later date automatically update other content on a company's Web site?

D. Investment Advice on Corporate Web Sites

Can a company's Web site content be considered investment advice?

E. Corporate Liability for Hackers and Imposters

Can a company be liable if its Web site is hacked and misleading content is posted?

F. Developing a Corporate Web Site

What should be counsel's role in developing a Web site?
What should be counsel's role in developing an intranet?
What is a Web site development policy?
What should be in a Web site development policy?

G. What are Companies Posting on their IR Web Pages

How many companies have an investor relations Web page?
Should a company have an investor relations Web page?
What types of investors access investor relations' Web pages?
What are common materials on IR Web pages?
What are the "cutting edge" developments on IR Web pages?
Can a company be liable for stock prices posted on its Web site?
Can a company be liable for linking to a Web site that has inaccurate stock prices?
Can a company selectively choose which press releases it includes on its Web site?

H. What Types of Web Site Content are "Offers"

Can content on a company's Web site inadvertently be considered an offer to sell or solicitation to buy securities?
How can a company avoid "inadvertent" offers?

I. Web Site Content during Registration

What should companies do with their Web sites before filing a registration statement?
What should companies do with their Web site after filing a registration statement but before it goes effective?
What types of changes to a company's Web site are considered conditioning the market?

J. Links on a Company's Web Site

Can companies be liable if they link to third party content?
When can companies be liable for its links to third party content?
What is the SEC's analytical framework to determine if companies are liable for linked third party content?
How does a company's statements about a third party link make it attributable to a company?
Can a company be liable for a third party link even if it's silent about it?
What are adequate warnings about the source of linked content?
Can a disclaimer protect a company from liability for links to third party content?
What is "selective" linking?
How should a company design a Web page so that linked content is not attributable to it?
How does the envelope theory apply to links in the SEC's link framework?
Can a company link from offering materials on its Web site to third party content?

K. Analyst Reports and Links

Is a company responsible for an analyst's research report if it links to it?
How can companies invoke the safe harbor for forward-looking information in Webcast conference calls?
How can companies invoke the safe harbor for forward-looking information for conference call slide shows or scripts posted on a Web site?
Should companies list which analysts cover them on their Web sites?
Should companies post or link to First Call consensus estimates?
Should companies post analyst conference call transcripts on the Web?

L. Who are the Service Providers that Assist Companies to Design their IR Web Pages?

A. Understanding the Types of Web Site Content that May Impose Liability

When is a company responsible for a particular Web site?

When a site is established by a company - or any of the company's business units.

Many companies have multiple Web sites and policies that impose a corporate approval process before a site is launched. See more @ Web site approval policies.

Issues arise when business units create Web sites without the approval of a company's senior management or outside of a corporate policy.

Even more problematic are Web sites created by employees completely on their own - but they use their employer's name and logo. Companies likely can have redress against the creators of these Web sites for trademark infringement and contract violations - but they still may be held liable by third parties who reasonably believed that the content was "owned" by the company.

Can a company have securities law liability for all of the content on its Web site?

Not likely - but a company may be surprised to find that it has securities law liability for content that is not necessarily investor-oriented. However, a company's Web site should be scrutinized just as much as communication made in traditional off-line media - since the SEC has stated that liability is applied equally to communications over all mediums.

According to the SEC, each page on a company's Web site potentially could be subject to the antifraud provisions of the federal securities laws if it somehow "reasonably could be expected to reach investors."

Companies should assume that almost each Web page of its Web site may be subject to securities law liability since an "offer" is broadly interpreted - even Web pages that solely market products and services could be considered an "offer". See more @ definition of "offer."

However, it's likely that a court would more closely scrutinize content on a company's investors relations Web page - because investors are more likely to rely on that content for investment decisions. In its guidance, the SEC has not made a distinction between investor relations and other Web pages in this context.

Source: The SEC noted that liability is the same for all mediums in footnote 11 of Release 33-7233 (October 6, 1995). Examples of cases that held that misleading product and service information can be the basis for Rule 10b-5 liability include In re Apple Computer Sec. Litig., 886 F.2d 1109 (9th Cir 1989); and In re Carter-Wallace Sec. Litig. 150 F.3d 153 (2nd Cir. 1988). The SEC noted that content that "reasonably could be expected to reach investors" could be subject to securities law liability in footnote 49 of Release 33-7856 (May 4, 2000).

Can a company use marketing information for its products and services on its Web site without incurring securities law liability?

Probably - so long as the marketing information is not misleading. However, this information may very well be subject to anti-fraud liability - because "offer" is broadly interpreted.

A company's marketing department should not be prohibited from hawking the company's products and services - product and service descriptions do not need to be bland (but shouldn't be zany either).

Traditional promotional content is likely to be upheld as allowable "puffery" in court - but a company should ensure that this information is not misleading.

If a company is conducting an offering, it should ensure that it's marketing content is consistent with the type of marketing done in the past (and perhaps ensure that the pages do not link to marketing content). See more @ conditioning the market for an offering.

Source: Product and services puffery has been upheld many times in court, including In re Stratosphere Corp. Sec. Litig. 1998 Lexis 4759 (D.Nev. April 7, 1998). Cases that held misleading product and service information to be the basis for Rule 10b-5 liability include Warshaw v. Xoma, 74 F.3d 955 (9th Cir. 1996); In re Apple Computer Sec. Litig., 886 F.2d 1109 (9th Cir 1989); and In re Carter-Wallace Sec. Litig. 150 F.3d 153 (2nd Cir. 1988).

Is a company responsible for content on its Web site provided by a third party?

Yes - but this risk of liability can be reduced if the content agreement between the parties shifts certain risks to the third party that created the content.

The need to allocate risk by agreement is increasingly important, as "syndication" becomes more popular (under which companies partner and either trade content or one party provides content for the other's site) - since the law has not fully evolved to recognize the nature of these arrangements.

So far, the SEC's guidance has not specifically addressed whether companies can avoid liability for third party content on their Web sites - except to note that framed or in-lined content can enhance the risk of confusion (making it more likely that the company will be deemed responsible for the framed content). See more @ framed links.

Courts may analyze whether investors could reasonably believe that syndicated content on a company's Web site is the company's content. Under this analysis, if content is labeled as someone else's content, this disclaimer may persuade a court. The problem is that a strategic partner is not likely to agree to a disclaimer - since it's counter to the partnership philosophy.

Source: The SEC addressed framed links in Section II.B.1.b. of Release 33-7856 (May 4, 2000).

Can a company be held liable for content provided to a third party for its Web site?

Yes - but this risk of liability can be reduced if the content agreement between the parties shifts the risk to the party who controls the Web site.

The need to allocate risk by agreement is increasingly important, as "syndication" becomes more popular (under which companies partner and either trade content or one party provides content for the other's site) - since the law has not fully evolved to recognize the nature of these arrangements.

The SEC has stated that companies can contract with third parties to post their offering materials on third party Web sites - but the company retains liability for the materials. See more @ making an offer on a third party Web site.

If the content contributed by a company is not offering material, courts may analyze whether investors could reasonably believe that syndicated content on a third party's Web site is the company's content. Under this analysis, if content is not labeled as the company's content - this fact may persuade a court. The problem is that a strategic partner is not likely to agree to a disclaimer - since it's counter to the partnership philosophy.

Source: In Example 7 of Release 33-7233 (October 6, 1995), the SEC illustrated how a company could contract with a third party to post its prospectus.

What types of legal risks does a company have for its Web site?

There are numerous types, many of which are state law actions, including:

fraud
defamation or libel
trade secrets
stock manipulation
breach of fiduciary duty
breach of contract
copyright or trademark infringement.

Are companies being sued for their Web site content?

Yes - the plaintiffs' bar increasingly recognizes that corporate Web sites can be potent litigation weapons. They look for overly optimistic statements or forward-looking information on Web pages that companies may overlook when scrubbing their sites - such as the "About Us" or "President's Message" sections of their sites.

Securities law class action lawsuits frequently cite corporate Web site content as part of the basis for the allegations. Some members of the plaintiff's bar have Web site forms for investors to use to inform them of their complaints.

Source: Examples of actual corporate Web sites cited in complaints are in Mary Lou Peters, "Avoiding Securities Law Liability for a Company's Web Site," Insights (April 1999). Milberg Weiss has an online complaint form at www.milberg.com/mil/report_form.html.

B. Disclaimer Use on Corporate Web Sites

How do companies typically provide Web disclaimers?

With a "Terms and Conditions" link on their home page that almost always is in small print at the bottom of the page. In most cases, the link itself is not descriptive, and visitors are not urged to click it.

If a link to disclaimers is merely called "Terms and Conditions," it may not be reasonable to expect investors to know that the linked page contains disclaimers.

The SEC has provided guidance that disclaimer use is a factor to consider in determining whether a company is responsible for linked content. See more @ use of disclaimers with links. However, the SEC has made it clear that Web site disclaimers do not completely insulate a company from liability - for links or otherwise.

Source: The SEC stressed that disclaimers do not automatically protect a company from liability for its Web site content in footnote 61 of Release 33-7856 (May 4, 2000).

How many Web pages within a corporate Web site typically contain Web disclaimers?

Not many - typically just the home page.

Since most links on the Web do not link to home pages (a.k.a. "deep links"), Web disclaimers should be on or accessible from each Web page.

If investors access an investor relations' Web page (or any other Web page) without first accessing the home page, they arguably do not even have constructive knowledge that the disclaimers exist. See more @ Web site disclaimers.

C. Updating Web Site Content

Do companies have a duty to update content on their Web site?

Maybe. For quite some time, there has been disagreement in the courts over whether companies have a duty to update their statements that were true when made - this uncertainty extends to Web site content.

This uncertainty is compounded on the Web, because some commentators have argued that Web site content is continuously "published" and "alive" - as this content is continuously available. In other words, the line between information that was misleading when "made" or by subsequent events is blurred. See more @ how long are facts considered "alive."

If that argument prevails, a company could be liable for Web site content that is true when made, but later rendered inaccurate - because it would be deemed to have made an untrue statement as the content was republished. This happens often on the Web because many companies do not routinely monitor their Web sites for staleness.

The SEC has noted that this is a gray area - and has requested comments on how to facilitate the availability of historical information on the Web. In offline contexts, the SEC has indicated that it believes that a duty to update exists when investors still are relying on material prior statements that are misleading - this view should encourage companies to more actively monitor their Web sites. The SEC has not yet expressed a view as to whether disclosure is considered constantly republished if posted on a Web site.

For a duty to update to exist, the statements often must be forward-looking in nature - and must remain "alive" in the minds of reasonable investors. In addition, the information must be "material" - this may not include ordinary forecasts such as earnings projections - but probably does include mergers and other extraordinary transactions. See more @ when is a statement considered "material."

Note that Congress specifically did not impose a duty to update forward-looking information when it passed the Private Securities Litigation Reform Act of 1995. Also note that there clearly is a duty to update a company's stream of SEC reporting disclosure if a company is conducting an offering or otherwise has a SEC filing obligation or voluntarily makes a filing.

Source: Since Backman v. Polaroid Corp., 910 F.2d 10 (1st Cir. 1990), courts have been divided as to whether there is a duty to update disclosure that subsequently becomes misleading. For example, the following courts found a duty to update (at least to some extent): Shaw v. Digital Equipment, 82 F.3d 1194 (1st Cir 1996); In re IBM Corp. Securities Litig., 163 F.3d 102 (2nd Cir. 1998); In re Burlington Coat Factory Securities Litig., 114 F.3d 1410 (3rd Cir. 1997); and Weiner v. Quaker Oats, Inc., 129 F.3d 310 (3rd Cir. 1997).

On the other hand, the following courts did not find a duty to update: Hillson Partners v. Adage Inc., 42 F.3d 204 (4th Cir. 1994); Eisenstadt v. Centel Corp., 113 F.3d 738 (7th Cir. 1997); and Stransky v. Cummins Engine Co, 51 F.3d 1329 (7th Cir. 1995). Note that the 9th Circuit's position on the duty to update is ill-defined and unclear.

The SEC noted that this is a gray area in Section D.1. of Release 33-7856 (May 4, 2000). In the absence of any statutory provision clearly stating there is a duty to update, Section 10(b) and Rule 10b-5 are the sources of arguments that a duty exists. Section 27A(d) of the Securities Act of 1933 and Section 21E(d) of the Securities Exchange Act of 1934 state that a duty to update doesn't necessarily arise merely by making a forward-looking statement - these sections were enacted by the Private Securities Litigation Reform Act of 1995.

What do critics of the duty to update online information say (if there is any such duty)?

Some commentators have argued that any liability for online documents should be limited to the date when materials are first posted - in the absence of any statement that the disclosure is supposed to have continuing relevance.

These commentators argue that the absence of a date on a posted document should not be conclusive as to whether the disclosure is considered ongoing and republished. They also argue that documents should be read in the context of other documents posted on the Web site - so that more recent online disclosure should automatically be considered to update the older documents.

Source: The Committee on Federal Regulation of Securities of the Business Law Section of the ABA noted that lack of a date on a posted document should not be used against a company in its August 2, 2000 comment letter on Release 33-7856 (May 4, 2000).

Do companies have a duty to correct content on their Web site?

Probably - most courts find that companies have a duty to correct information if it discovers that it was misleading when issued.

Following this theory, companies should correct Web site content that was misleading when posted - particularly if the content is material to an investor.

Source: The SEC stated that, depending on the circumstances, companies have a duty to correct information in SEC filings that were misleading from the outset or by subsequent events in Release 33-6084 (August 2, 1979). Although dated, this probably still is the SEC's view.

Does a company have a duty to update information for which it did not have a duty to disclose?

Probably not - there probably is not a duty to update statements that are not made in a SEC filing or otherwise releases material information to the market.

The argument is that the information is not material - so there is no duty to update. Courts generally have not found a duty to update if the information was not required to be disclosed - since "materiality" typically is the standard for disclosure from the listing exchanges and now Regulation FD. See more @ disclosure thresholds under Regulation FD.

However, it is quite difficult to know with certainty whether information is "material" due to the facts and circumstances test applied. See more @ when is information considered "material."

Source: In Hillson Partners L.P. v. Adage, 42 F.3d 204 (4th Cir. 1994), In re Time Warner Inc. Securities Litigation, 9 F.3d 259 (2d Cir. 1993) cert. denied, 511 U.S. 1017 (1994) and Gross v. Summa Four Inc., 93 F.3d 987 (1st Cir. 1996), the courts did not find a duty to update for predictions that were not material under the federal securities laws.

Is there a difference between a duty to update and a duty to correct?

Yes, companies likely have a duty to correct - but it's uncertain if they have a duty to update.

A duty to correct applies to facts that are misleading when made. A duty to update applies to facts that become misleading by virtue of subsequent events.

As a practical matter, courts often are not clear about the difference between the two duties - so a company may want to assume that it has a duty to update since a court may view it as a duty to correct.

Source: In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410 (3d Cir. 1997), the court noted a difference between the two duties.

For how long does a company have a duty to update (if such a duty exists)?

For as long as the fact is "alive."

Unfortunately, there is no bright line test to determine how long a fact's life is - it's a facts and circumstances test.

Note that some commentators believe that a fact posted on the Web is continuously alive and republished, particularly if the fact is not dated. See more @ responsibility for historical information on the Web.

Source: In A.H. Robins, 607 F.2d 545 (2d Cir. 1979), cert. denied, 446 U.S. 946 (1980), the court noted that one of the circumstances to consider was whether subsequent similar types of information are available (e.g., a 2 year old annual report is stale if a more recent report is available).

How can companies comply with a duty to update (if such a duty exists)?

Active Web site management, including:

designating one or more employees to be responsible for the updating process (including someone from the legal department).
clearly dating content that is posted, particularly for time-sensitive content (including dating content that has been moved to an "archive" section). See more @ best ways to date content.
regularly verifying that content is still accurate and timely - and if not, removing or archiving it. Offering materials should be promptly removed after the prospectus delivery period ends - so that investors trading in the company's securities on the open market can't claim that they relied on the disclosure in these materials.
regularly verifying that links are active and that third party content is not objectionable and removing all third party links from the IR Web page.
creating a separate "archive" Web page for historical documents (with an "archive" label in the Web page's title).

Some companies expressly disclaim a duty to update on their Web sites. It's unknown whether these disclaimers are effective - but they likely would not be deemed effective by a court if a company was reckless in not updating its content. In other words, a mere disclaimer probably is not enough to protect a company, it must "scrub" its Web site regularly too. See more @ disclaiming a duty to update.

What are the best ways to date content to reduce the likelihood that a company has a duty to update?

Use terminology so that it does not appear that the company is actively updating content - since that could lead to a court finding that the company misled investors about its updating activity.

For example, it's preferable if a company states that content was "last posted on May 1, 2000" rather than stating "last updated May 1, 2000." Another common caption on IR Web pages is "Current SEC Filings" - it's better to use the label "Most Recent SEC Filings."

In addition, companies should not rely solely on the date in a press release byline as a dating practice - a date should also be included in the link that leads to the press release (so that it's clearly visible even before the press release is accessed and puts an investor on better notice as to its "freshness").

Source: An excellent article that deals with updating issues and other corporate practices for IR Web pages is Steven Dolmatch and Amy Goodman, "Investor Relations on the Web," ACCA Docket (July/August 2000).

Is a date in the byline of a posted press release sufficient to avoid a duty to update?

It may not be - merely relying on the date in a posted press release may not be sufficient to "date" it. See more @ SEC's request for comment on archived historical information.

In the absence of further SEC guidance, companies should not rely on the date in a press release byline - a date should be included in the link that leads to the press release (so that it's clearly visible even before the press release is accessed and puts an investor on better notice as to it's "freshness"). See more @ best ways to date content.

Does similar content with a later date automatically update other content on a company's Web site?

It's unknown - so companies should include dates on all documents and should regularly move older documents to an "archive" section.

The SEC has requested comments on how online historical content should be treated - some commentators argue that documents should be read in the context of other documents posted on the Web site - so that more recent online disclosure should automatically be considered to update the other content on a Web site. See more @ criticism of the duty to update.

Source: The Committee on Federal Regulation of Securities of the Business Law Section of the ABA noted that lack of a date on a posted document should not be used against a company in its August 2, 2000 comment letter on Release 33-7856 (May 4, 2000).

D. Investment Advice on Corporate Web Sites

Can a company's Web site content be considered investment advice?

Yes - if a company's Web site contains or links to media articles or other information relating to its future financial performance.

A disclaimer may help a company avoid investment advisor status - but likely will be effective only if the Web site truly does not provide investment advice. See more @ disclaiming providing investment advice.

E. Corporate Liability for Hackers and Imposters

Can a company be liable if its Web site is hacked and misleading content is posted?

Perhaps. There have been cases where companies were held liable for not thwarting foreseeable intervening criminal acts - and not having adequate Web site security possibly could fall within that realm.

In the electronic delivery context, the SEC has stated that companies must take reasonable precautions to ensure the integrity and security of the information electronically delivered. However, under the antifraud provisions of Rule 10b-5, a company must be reckless to be held liable - mere negligence is not actionable.

Source: The SEC noted that companies have a responsibility to protect their information in Section II.A. of Release 33-7233 (October 6, 1995).

F. Developing a Corporate Web Site

What should be counsel's role in developing a Web site?

Ideally, counsel should review content before it is posted on the Web - rather than follow a "post now, review later" practice. Counsel should ensure that there is a process to regularly monitor a Web site's content for continued accuracy and relevancy.

Counsel should also encourage the investor relations department to prepare the IR Web page - rather than the marketing department (since IR professionals are likely to be more sensitive to securities law matters). If a service provider creates a company's IR Web page - company counsel should be actively involved to ensure undue risks are not taken. See more @ who are the service providers who assist in creating IR Web pages.

As a practical matter, pre-posting review may not be feasible - particularly in larger or technology companies that have numerous Web sites. At a minimum, counsel should regularly review all corporate Web site content.

As part of a review, counsel should draft disclaimers that are tailored for specific content - and consider drafting risk factors for the IR Web page (either the same ones in a SEC filing (with a disclaimer that it was drafted as of the filing date - and provide any necessary updates and be prepared to continuously update it) or a link to the risk factor section in the latest SEC filing). See more @ disclaimers for Web site content.

What should be counsel's role in developing an intranet?

Not much different than for a Web site - counsel should pre-review or at least regularly review intranet content. See more @ counsel's role in developing a Web site.

Web disclaimers should be used on intranets - since employees (who also are stockholders in many cases) and others who have intranet access can bring claims based on the intranet content and disclaimers may help limit liability.

What is a Web site development policy?

A policy that provides guidance as to what type of content can be posted on a company's Web site and intranet - and describes the process by which the content is approved before it's posted and how the site is regularly monitored to correct, archive or remove content.

The goal of the policy is to create a uniform Web strategy (e.g., strengthen branding) - and reduce the risk of liability. Larger companies may have numerous Web sites created by business units - which can result in conflicting content and disparate quality. A company's Webmasters should have limited control over the substance of content to reduce the risk of liability. See more @ use of disclaimers.

What should be in a Web site development policy?

A clear description of who should pre-approve and monitor content for a company's Web site - and its intranet.

Counsel - either in-house or outside - should play a role in this approval and monitoring process. It probably isn't necessary for counsel to approve each kernel of information, particularly if counsel played a role in drafting that information (e.g., SEC filings and press releases). See more @ counsel's role in developing a Web site.

The policy also should provide procedures to determine (and require) when content is archived to a Web page with an "archive" label to reduce the risk of any duty to update - as well as require disclaimers that are tailored for specific content. For example, forward-looking information should have a disclaimer either linked or approximate to it. See more @ disclaimers for forward-looking information.

The policy should also require the maintenance of records about what was the precise content of a company's Web site at regular intervals of time - this enables a company to demonstrate what was posted at any given time (although this information could be harmful in a lawsuit if a site is not actively managed).

G. What are Companies Posting on their IR Web Pages

How many companies have an investor relations Web page?

Almost all.

A 1998 survey showed that almost 90 percent of respondents had an investor relations section on their Web site.

Source: The May 1998 survey entitled "A Study of Corporate Disclosure Practices" was conducted by the National Investors Relations Institute.

Should a company have an investor relations Web page?

Probably - even though it's not required by law.

IR Web pages are useful to help investors easily find the type of information they desire - and may be able to protect the other content on a company's Web site from securities law liability by bolstering an argument that such content does not relate to investment decisions. See more @ securities law liability for product and service content.

Note that the converse argument is likely to be made by the plaintiff's bar - that content on an IR Web page was directed towards investors (so all of the content on this page should be subject to the securities laws).

With this in mind, IR Web pages are not the place for hype or other promotional content. It may even be wise to place the "President's Message" from a glossy annual report on the company's home page rather than the IR Web page - although detaching it from the rest of a posted annual report is not a good idea (since SEC mandated documents should appear online as they do off-line, unless two different versions are filed with the SEC. See more @ using differing versions of a SEC document).

What types of investors access investor relations' Web pages?

All types.

Although IR Web pages may not directly result in attracting many new investors, survey data indicates that the Web is a prominent resource for both retail and institutional investors - it also is a key resource for journalists.

For most retail investors, a company's IR Web page is a primary source of information - for institutional investors, it's a secondary source (since they have access to expensive paid subscription databases - and also to management in most cases).

Source: The May 1998 survey entitled "A Study of Corporate Disclosure Practices" was conducted by the National Investors Relations Institute. An excellent article criticizing how companies do not consider institutional investors in designing their IR Web pages is Jay Kraker, "Investor Relations: Corporate Web Sites Missing the Boat in Serving Institutional Investors," wallstreetlawyer.com (May 2000).

What are common materials on IR Web pages?

Relatively common documents include:

earnings releases and other press releases
SEC filings - directly or by linking to an EDGAR database
glossy annual reports
analyst conference call announcements, Webcasts or scripts
stock price data (often delayed 20 minutes)
frequently asked questions about obtaining IR-related information

Less typical documents include:

stockholder meeting information
financial statements carved from SEC filings (could be dangerous since they are not complete documents as intended)
management speeches or presentations
corporate profiles
corporate governance policies or guidelines

Most of these items also should have related disclaimers, particularly if they contain forward-looking information. See more @ disclaimers.

Source: Intel Corp. (www.intel.com) is one of the few companies to post their corporate governance guidelines on their IR Web page. An informal survey of what companies post on their IR Web pages (based on a sample of 400 companies) is provided in "Caught in the Web," Financial Executive (Sept./Oct. 1999).

What are the "cutting edge" developments on IR Web pages?

More and more technology companies offer innovative information on their IR Web pages by posting multimedia presentations and hosting interactive communications.

A few companies also provide or link to third party content about the company. Very rarely, a company will sponsor or link to a message board relating to a company. See more @ liability for sponsoring or participating on a message board.

Overall, companies have not been as innovative as technology allows - companies have been slow to use their Web sites to serve investors, probably due to:

the lack of widespread use of broadband connections which makes some opportunities not practical for investors, such as the use of streaming video.
the costs of building and maintaining a high profile IR Web page.
another factor may be that most companies outsource the development of their IR Web pages - but most of these service providers are experienced and have cutting edge tools if their clients want them. See more @ outsourcing of IR Web page development.

Can a company be liable for stock prices posted on its Web site?

Yes. One possible claim is that a posted stock price was inaccurate and an investor relied on it to place a trade order.

Many companies post recent stock price quotes on their Web sites (20 minute delay is typical) - and they get stock price data from a third party. Many of these companies include a disclaimer that warns investors that the price data may be inaccurate and that the company is not responsible for the data. It's unknown how effective these disclaimers would be if the prices posted were inaccurate. See more @ disclaimers for stock prices.

Many of these disclaimers also state that the third-parties that provide the data don't have liability for the data - even though they would appear to be more culpable if the data was inaccurate. Companies should attempt to negotiate their contract with these third-parties to keep them on the hook for inaccurate data. See more @ IR Web page service providers.

Can a company be liable for linking to a Web site that has inaccurate stock prices?

Not likely. Using the SEC's link liability framework, it would appear that there would have to be unusual circumstances - such as the company was aware that the stock price data would be inaccurate - for the company to be liable for such a link. See more @ the SEC's link liability framework.

Companies still should disclaim responsibility for the link - including noting that the stock price data may be delayed and not real-time quotes. See more @ disclaimers for stock price data.

Can a company selectively choose which press releases it includes on its Web site?

Probably - particularly if there is a rationale for the selection criteria that doesn't involve misleading investors.

On its IR Web page, some companies choose to post only investor-oriented press releases - or all of its press releases except for relatively insignificant matters. There is no duty to post any of a company's releases - nor is there a duty to post all of them if some are posted.

It's probably wise to not post a policy of how press releases are selected - this diminishes a company's flexibility and allows others to call into question about how it's enforced.

Note that press releases should be clearly dated - and companies probably should not just rely on a release byline date. See more @ is a date in a byline sufficient to avoid a duty to update. Companies should consider moving press releases to an archive section after a period of time - particularly if a subsequent press release updates some of the details of an older release. See more @ regular archival of content.

H. What Types of Web Site Content are "Offers"

Can content on a company's Web site inadvertently be considered an offer to sell or solicitation to buy securities?

Yes - "offer" is broadly interpreted in the federal securities law.

It can include product and services information on a company's Web site - even if the company does not believe that this information "offers" its securities. See more @ communications during an offering.

Another issue is whether a company's online product and services information is considered a "general solicitation or advertisement" - which would prevent the company from being able to rely on an exemption for a private placement. See more @ what is a "general solicitation."

Source: Section 2(a)(3) of the Securities Act of 1933 defines an "offer" to include solicitations of an offer to buy or to dispose a security.

How can a company avoid "inadvertent" offers?

By having counsel pre-post review content or regularly review content after it's posted - and by avoiding statements that essentially encourage investors to buy the company's stock. It should particularly ensure that there is no misleading information about a company's products or services.

Traditional promotional content is likely to be upheld as allowable "puffery" in court. However, a company should ensure that this information is not misleading - and if it's conducting an offering, ensure that it's marketing activities are consistent with the type of marketing done in the past. See more @ conditioning the market for an offering.

In addition, companies can use disclaimers to attempt to shield promotional material from securities law liability. However, the SEC has made it clear that disclaimers can't completely insulate a company from liability - disclaimers are one factor that the SEC considers in determining whether a company has liability for linked content (even content on a company's Web site linked from its IR Web page). See more @ liability for product and service information on a company's Web site.

Source: Product and services puffery has been upheld many times in court, including In re Stratosphere Corp. Sec. Litig. 1998 Lexis 4759 (D.Nev. April 7, 1998). On the other hand, there have been cases that held misleading product and service information to be the basis for Rule 10b-5 liability, including: Warshaw v. Xoma, 74 F.3d 955 (9th Cir. 1996); In re Apple Computer Sec. Litig., 886 F.2d 1109 (9th Cir 1989); and In re Carter-Wallace Sec. Litig. 150 F.3d 153 (2nd Cir. 1988).

I. Web Site Content during Registration

What should companies do with their Web sites before filing a registration statement?

Ensure that their Web site content does not "condition the market." This means reviewing all of the content on a company's Web sites and intranets (as well as any sites belonging to strategic partners) - not just the IR Web page. A company cannot make any offers before it files a registration statement - and "offer" is broadly defined. See more @ the definition of an "offer."

Before a registration statement is filed, all of these sites should be "scrubbed" - so that any content that may possibly be deemed an "offer" is removed or revised. Note that this scrubbing itself may signal the market that the company may soon be offering securities - so a company should be careful about how it scrubs its sites.

This scrubbing should be as inconspicuous as possible and if anyone notices (which easily can be tracked with online "spiders" that report when Web site content is revised) and asks questions - follow a "no comment" policy. See more @ communications during an offering.

Source: The SEC clarified that its guidance regarding which corporate communications can be made during the pre-filing and waiting periods applies also to companies going public in Section II.B.2. of Release 33-7856 (May 4, 2000).

What should companies do with their Web site after filing a registration statement but before it goes effective?

Continue to ensure that the Web site content does not "condition the market" - only ongoing routine business communications should be posted. See more @ distinction between ordinary business communications and sales content.

No mention of the offering should be made other than in the form of a Section 10(a) prospectus or a tombstone ad type announcement - since a company cannot make a "written" offer during this waiting period. See more @ what is a "writing."

A company's Web site should not contain a tombstone ad that contains too much information - the SEC staff strictly construes what can be in tombstone ads and routinely looks at a company's Web site as part of its review process (as well as conduct general Web and Nexis searches). See more @ the SEC staff's review process.

In addition, any Web site facelifts during the waiting period probably will need to be justified as not facilitating the company's offering, which may be difficult to do - it's probably best to wait until the offering is closed before dramatically modifying a Web site.

This can be problematic for companies seeking to grow fast, which may require constant Web site changes - a historical pattern of frequent Web site changes may be sufficient circumstances to successfully argue that a revision during the waiting period is not conditioning the market (but this should be discussed with the SEC staff). See more @ types of Web site changes that are considered conditioning the market.

The SEC has stated that a company going public that contemporaneously establishes a Web site may have a problem - because this company may not be able to successfully argue that it had a substantial prior online history and the mere creation of a Web site may condition the market. See more @ building a history of routine communications.

Source: The SEC noted that companies going public may have communications challenges in Section II.B.2. of Release 33-7856 (May 4, 2000). In Example 18 of Release 33-7233 (October 6, 1995), the SEC acknowledged that companies can post tombstone ads on their Web sites.

What types of changes to a company's Web site are considered conditioning the market?

It's a facts and circumstances determination.

If the changes to a Web site become the subject of a media article that also discuss a company's offering, a company may have difficulty arguing that the changes did not facilitate its offering - even if the offering is not the article's main focus.

If only factual information is revised - and the Web site frequently is updated to make it more user-friendly and informative, it's less likely to be considered conditioning the market.

Source: The SEC's long-standing guidance regarding the difference between ordinary business communications and conditioning the market is in a series of releases, including Release 33-3844 (October 8, 1975), Release 33-5180 (August 20, 1971) and Release 33-5009 (October 7, 1969). The SEC confirmed that this guidance should be equally applied Web siteto online communications in Section II.B.2. of Release 33-7856 (May 4, 2000). The SEC requested comments on permissible communications for Internet companies in Section D.6 of Release 33-7856 (May 4, 2000).

J. Links on a Company's Web Site

Can companies be liable if they link to third party content?

Yes - the SEC clearly has stated that companies can be liable for the content that they link to from their Web sites.

This can be particularly troubling for linked third party content, since a company typically cannot or does not want to exercise control over third party content. For example, forward-looking information on third party sites may not have safe harbor language that the linking party could rely on for protection.

Source: The SEC believes that companies - as well as other market participants - can be liable for linked content under Section 10(b) and Rule 10b-5 as well as Section 17(a) of the Securities Exchange Act of 1934, see footnotes 48-50 and accompanying text of Release 33-7856 (May 4, 2000). In footnote 52 of Release 33-7856 (May 4, 2000), the SEC cited its analysis in In the Matter of Presstek, Inc., Release 33-39472 (December 22, 1997) to support its application of the antifraud provisions to links.

When can companies be liable for its links to third party content?

Depends on whether a company has involved itself in the preparation of the third party content - or explicitly or implicitly endorsed or approved the content.

The SEC has established a framework consisting of non-exclusive factors to determine whether a company is deemed to adopt and be liable for linked third party content. The SEC emphasizes that no single factor dictates the outcome of the analysis.

One notable aspect of the SEC's link framework is that it's one of the relatively rare instances where the SEC has provided guidance about the application of anti-fraud liability.

Source: As discussed in footnotes 51-52 and accompanying text of Release 33-7856 (May 4, 2000), the SEC's link framework appears to be partially based on "entanglement" and "post-publication adoption" theories that apply in the analyst research context.

What is the SEC's analytical framework to determine if companies are liable for linked third party content?

The SEC's framework contains 6 factors that relate to the context, risk of confusion and presentation regarding a link. These non-exclusive factors are:

importance of link - what a company says about the hyperlink
link's context - what is implied by the context in which a company places the hyperlink
disclosure about link - whether a company provides warnings about the source of the content
disclaimer use - whether a company uses a clear and prominent disclaimer that precedes or accompanies the link
selective linking - whether a company selectively links to some content, but not other related content
link presentation - whether a company presents a link on a screen in a way that influences disproportionately an investor's decision to click on it

Source: The SEC's link framework is in Section II.B of Release 33-7856 (May 4, 2000).

How does a company's statements about a third party link make it attributable to a company?

Quite easily. If a company explicitly endorses third party content, it's likely to be considered attributable - but even subtler statements can lead to attribution.

The SEC has provided examples of statements that indicate that a company is endorsing a link such as - "XYZ's Web site contains the best description of our business that is currently available" - and a more ambiguous "As reported in Today's Widget, our company is the leading producer of widgets worldwide."

Source: These examples are in Section II.B.1(a) of Release 33-7856 (May 4, 2000).

Can a company be liable for a third party link even if it's silent about it?

Yes - the context alone may imply that the linked content is attributable to the company.

Source: The SEC specifically noted this in Section II.B.1(a) of Release 33-7856 (May 4, 2000).

What are adequate warnings about the source of linked content?

It's a facts and circumstances determination - but the SEC notes that it's less likely that the linked content is attributable if the company provides an exit notice that clearly and prominently informs investors that:

they are leaving the company's Web site, and
the linked content is the third party's responsibility, not the company's.

Source: The SEC's exit notice guidance is in Section II.B.1(b) of Release 33-7856 (May 4, 2000).

Can a disclaimer protect a company from liability for links to third party content?

No. The SEC has made it clear that disclaimers cannot provide full protection from liability.

It's still a facts and circumstances determination - since disclaimer use is just one of many factors that the SEC has established. See more @ disclaimer use.

Note that Congress and the SEC have had long-standing policy objections regarding specific disclaimers of anti-fraud liability, including a position that indemnification of such liability is contrary to the federal securities laws and the SEC's policy. In fact, companies are required to provide an undertaking regarding the SEC's position regarding indemnification when they file a registration statement - and sometimes are required to disclose an acknowledgement of the position in a SEC document.

Source: The SEC's statement that disclaimers cannot guarantee that companies will not be liable is in footnote 61 and accompanying text of Release 33-7856 (May 4, 2000). The SEC's position regarding indemnification for anti-fraud liability - and related requirements for companies - is in Section 14 of the Securities Act of 1933, Section 29(a) of the Securities Exchange Act of 1934, Item 510 of Regulation S-K and the undertaking in Item 512(h) of Regulation S-K.

What is "selective" linking?

If a company links to only a portion of a large amount of third party content about a particular matter - or if a company selectively establishes and terminates a link depending on the nature of the third party content.

The selective linking analysis focuses on whether a company is attempting to control the flow of information to investors.

Source: The SEC's selective linking discussion is in Section II.B.1(c) of Release 33-7856 (May 4, 2000).

How should a company design a Web page so that linked content is not attributable to it?

Avoid highlighting one link compared to other links - maintain the relatively same prominence, color, size and location of all links.

Source: The SEC's link presentation discussion is in Section II.B.1(c) of Release 33-7856 (May 4, 2000).

How does the envelope theory apply to links in the SEC's link framework?

The SEC follows the envelope theory in the delivery context, so that documents linked to each other are considered delivered together - but the envelope theory does not apply to determine whether Web site content constitutes impermissible free writing during a public offering. See more @ the envelope theory in an offering - or see more @ the envelope theory to electronically deliver.

Source: The SEC confirmed that the "envelope theory" is alive and well in just the delivery context in Section II.A.4. of Release 33-7856 (May 4, 2000) and that Examples 15 and 16 from Release 33-7233 (October 6, 1995) are still good electronic delivery precedent.

Can a company link from offering materials on its Web site to third party content?

It can be quite risky - it's likely that the linked content is considered part of the company's offering materials.

If the linked content falls within the broad definition of "offer," the SEC states that there is a strong inference that the linked content is attributable to a company.

If attributable, a company will have heightened liability for the content and have to file and/or deliver the linked content (depending on whether the offering materials that contain the link need to be filed or delivered). This also raises other issues, such as whether the third party needs to consent to have its content filed or delivered. See more @ links during public offerings.

Source: In Section II.B.2 of Release 33-7856 (May 4, 2000), the SEC stated that there is a strong inference that a company is responsible for linked third party content that falls within the definition of an "offer" under Section 2(a)(3) of the Securities Act of 1933.

K. Analyst Reports and Links

Is a company responsible for an analyst's research report if it links to it?

It depends. A company can be liable for entanglement if had a sufficient level of pre-publication involvement when the report was prepared - or can be liable for post-publication adoption if the company endorses or approves the linked report, explicitly or implicitly.

The "entanglement" and "adoption" theories sometimes overlap - so some factors relating to an adoption analysis also may apply in an entanglement analysis. See more @ entanglement and post-publication adoption theories.

Note that the SEC has not addressed the application of the "entanglement" theory to linked information on third party Web sites.

Source: The SEC noted that it has not yet addressed how entanglement applies to links in footnotes 53-55 and accompanying text of Release 33-7856 (May 4, 2000).

How can companies invoke the safe harbor for forward-looking information in Webcast conference calls?

Probably as it should for any other written communication.

Even though the SEC staff has indicated that live "real-time" audio communications are considered oral communications for filing purposes in the business combination context, they are considered written communications for purposes of the PLSRA. As long as the SEC interprets its rules so that Webcasts are written communications, meaningful cautionary language should accompany the forward-looking information in the analyst conference calls, and companies should use the safe harbor for written communications as well as for all Webcasts.

To be conservative, companies may want to ensure that all Webcasts should include a disclaimer with factors that note how actual results may vary from the forward-looking information in the Webcast and include meaningful cautionary language that "accompanies" this information. See more @ how to invoke the safe harbor on the Web.

Since streaming audio feels like oral communication, it's quite possible that a court would find that an audio stream is no different than a telephonic conference call - and telephonic conference calls historically have been treated by courts as oral communications. However, there has not been a judicial determination yet. See more @ what is a "writing."

Source: As the exception to the general rule that Webcasts are written communications, the SEC staff in Question 2 of the Division of Corporation Finance's Manual of Telephone Interpretations (Third Supplement July 2000) indicated that real time audio or video does not have to be filed as written communications under Rule 165.

How can companies invoke the safe harbor for forward-looking information for conference call slide shows or scripts posted on a Web site?

By posting a safe harbor for written communications that is tailored to the forward-looking information. Textual content on a Web site, including conference call slides or scripts clearly are "writings" - and the safe harbor for written communications should be used. See more @ how to invoke the safe harbor on the Web.

If a script is posted, companies should be careful to tailor the safe harbor to answers during the call's "Q&A" - this means that the script should not be posted until counsel has had time to review the script after the call. Companies should archive or delete a script after a relatively short period of time to minimize the risk that outdated information is publicly available. Very few companies post call scripts on the Web. See more @ whether companies should post scripts on their Web sites.

Note that it's unclear if a link to cautionary language satisfies the "accompany" requirement for the forward-looking safe harbor. See more @ linking to the forward-looking safe harbor.

Source: Lucent has a good example of a safe harbor for its Webcast conference calls at www.lucent.com/investor - the safe harbor includes factors that may cause actual results to vary (but its unclear whether the factors were tailored to the Q&A).

Should companies list which analysts cover them on their Web sites?

A mere list of analysts probably does not constitute entanglement - but links to reports or posting actual reports on the company's Web site could be viewed as entanglement. See more @ entanglement.

If a company does not include all of the analysts in the list that cover it - and the analysts omitted did not favorably cover the company, this arguably could be viewed as misleading investors. If the list does cover all analysts, a disclaimer should indicate that the company believes the list is complete - but that there are no assurances.

A disclaimer should also state that the company:

does not review analyst reports (or if a company does review for factual accuracy - indicate that it does not review for substance), and
does not endorse any of the reports.

A company should place a date on when the list was created (although it should attempt to keep it updated) - as well as indicate that this is a list of known analysts who have covered the company since a specified date (but also disclose that there is a possibility that other analysts cover the company).

The list can include the analyst's phone number or e-mail address - but companies may want to get permission to post this information first from each analyst as a courtesy.

Note that links to analyst reports can be problematic and should be avoided. See more @ linking to analyst reports.

A number of companies post a list of analysts that cover them on their Web sites including: CVS, Intel, MCI Worldcom, Costco, GTE and Motorola.

Should companies post or link to First Call consensus estimates?

Probably not. Although this information is useful to investors - it's also the type of forward-looking information that often is wrong and can be fodder for a lawsuit.

By posting these estimates, companies may encounter the problem of how does a company deal with consensus estimates that it believes are wrong (but now are posted on the company's Web site!) - it may incur liability under a post-publication adoption theory or for selective disclosure if it attempts to have an analyst revise its estimates. See more @ correcting erroneous analyst estimates.

Rather than post the estimates on their sites, some companies merely link to First Call consensus estimates - if a company does provide this link, it should post a disclaimer adjacent to the information or use an exit notice for a link and consider meeting the other factors in the SEC's link framework so that it does not inadvertently adopt the estimates. See more @ the SEC's link liability framework.

Should companies post analyst conference call transcripts on the Web?

Only if the appropriate safe harbor disclaimer for written forward-looking information accompanies the forward-looking information in the transcript - since a script clearly is a "writing." This frequently is overlooked because the call itself is oral - so the safe harbor used originally was for an oral communication. See more @ what is a "writing."

Of course, a transcript makes it easier for the plaintiff's bar to find fodder for a lawsuit - particularly if the transcript has projections. And the plaintiff's bar has been routinely checking corporate Web sites for statements to cite in their complaints. See more @ use of Web sites by plaintiff's bar.

Overall, companies have been reluctant to post scripts of the calls on their sites and very few have done it - probably due to these incremental risks compared to the more popular audio Webcasts.

L. Who are the Service Providers that Assist Companies to Design their IR Web Pages?

Many companies - both public and private - outsource some or all of their IR Web page needs. Perhaps the biggest reason why companies outsource is economies of scale. Not only have these service providers gained experience over the past few years in developing content for investors, they also have access to expensive databases that they can share relatively inexpensively. Over a half dozen service providers perform a variety of different functions for IR Web pages, often with little or no branding of their own.

These service providers are:

Through numerous differing IR Services, CCBN (www.ccbn.com) uses a combination of online and offline communications to help companies create robust IR Web pages. For example, CCBN mixes e-mail and fax blasts with Webcasts to quickly get out corporate messages. In addition, its TalkPoint technology allows companies to broadcast synchronized audio and PowerPoint slide presentations - either live or by archive - through their own sites.

For a typical corporate client, CCBN helps create an investor overview of the company with photos and biographies of the management team as well as customized stock price data and First Call consensus earnings estimates. CCBN feeds a company's press releases onto its site directly from BusinessWire and PR Newswire automatically - and can provide announcements of investment events, such as earnings release dates, conference call dates and appearances of key management. Annual reports and other financial documents can be tailored for the Web - as well as the ability to allow investors to submit proxies. There also is a Stock Purchase Service and email alerts.

Communication with institutional investors can be accomplished with CCBN's Event Publishing tools. CCBN's Post to your IR Web site. Investors can request e-mail alerts to notify them of new or revised event dates. In addition, posting your events on CCBN's StreetEvents network allows institutional investors to search a specific date range and city to find out about your events.
Shareholder.com (www.shareholder.com) provides an integrated communications service called "Shareholder Direct Dialog." This service integrates virtually every type of investor relations' communications through a unified application by managing teleconference calls; Webcast, fax and e-mail broadcasting; Web site development and maintenance, and postal mail fulfillment.

Shareholder Direct Dialog organizes a company's online communications into a Communications Center that matches the company's Web site's existing look and feel. These Centers are available in a quarterly subscription format with a fixed service fee. Probably the most unique aspect of the service is that each of a company's IR efforts is integrated with the other components. For example, a company's IR department can ensure that its IR Web page has the same news and earnings information as those that are sent by postal mail.
PR Newswire (www.prnewswire.com) has leveraged its vast experience as a news provider to offer several levels of IR Web page services to companies. Their most basic package allows a company to customize news information for its IR Web page. With access to over 1250 online services and databases, PR Newswire can offer quite a variety of styles and formats - including the ability for a company to customize an e-zine to send to interested investors.

A more comprehensive service provides financial fundamentals, including full SEC filings, intra-day quotes and interactive charts. The most comprehensive service has a Webcasting feature as well as the ability to monitor the Web for cybersmears and other problematic posts.
Primezone's IR Connect.com (www.primezone.com) positions itself to be a company's IR web page partner. IR Connect.com offers a turnkey service for updating and maintaining IR Web pages with as many bells and whistles as a company wants. For example, one company wanted to capture data about which investors accessed a Webcast conference call - so IR Connect.com built a registration form to facilitate this process. IR Connect.com automatically updates a company's IR Web page with new press releases and changing information.
StockMaster.com (www.stockmaster.com) specializes in providing stock price data. Its comprehensive stock performance page contains a company's 20 minute delayed stock quote as well as historical price and volume charts covering trading history relative to an index that the company chooses. It also has a stock price lookup for a company's prior 5 years of trading history. Stock price data is updated once every minute as reported by its 20 minute delayed feed. StockMaster.com also has products for integrated conference calls and web-remote presentations, such as narrated online slide presentations.