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Issue Date: IR Alert - July 1, 2009,
Q4 Web Systems Introduces Social Media and XBRL to Investor Relations Websites
Q4 Web Systems (www.q4websystems.com), a provider of software for corporate and investor relations websites, recently announced their Summer '09 release, which introduces Social Media and eXtensible Business Reporting Language (XBRL) capabilities to IR websites. This latest release offers different ways for investors to find, subscribe and share content through social networks, and builds on Q4's existing robust investor toolkit which includes over 30 IR Best Practice modules that work with any website.
In today's business environment, capital markets are more competitive than ever. Investors, analysts and the media all agree that the company IR website is the most important channel for communicating its investment story. It has become a leading source of information for all of these groups to verify and gather key company information — second only to popular financial sites such as Bloomberg and Reuters.
"Your IR website is your most accessible, far reaching investor communications tool, so it is essential to maximize its full potential. As the financial landscape remains uncertain, companies need to ensure that they have a consistent and frequent dialogue about their strategy and performance with shareholders and potential investors," said Darrell Heaps, president and CEO. "Disseminating information through traditional channels and making financial statements available in one format are no longer enough. The world is adopting social media in record numbers and soon, XBRL will be mandatory in the United States. Adding social channels to distribute information, as well as packaging financial information to make it easier to download and conduct comparative analyses, will increase your audience reach, empower people to engage with your company and give them a better understanding of your investment proposition."
Social Media:
Q4's web platform continuously evolves with market and regulatory trends that keep the IR website on the leading edge of companies' investor communications. Part of this evolution is the increasing use of social media — for example, a recent study of 17,000 internet users, from 29 countries shows that 57% of those individuals have signed up for a social network — making it the number one platform for creating and sharing social content.
Q4's latest IR website products create viral IR content, which means they can be shared, disseminated and republished across the web to millions of retail and institutional investors. Customers can now:
* Embed and distribute presentations, videos and documents through SlideShare, YouTube and Docstoc,
* Automatically update Twitter, LinkedIn and Facebook with news, presentations and events, and
* Aggregate all social activities on the IR website with inbound RSS feeds.
XBRL:
In addition to the increasing importance of Social Media, Q4 also recognizes that XBRL is more than an evolving trend as it will soon be mandatory for all U.S. based issuers.
In January 2009, the SEC introduced a phased mandate for filing in XBRL starting with the largest companies in June 2009 and then extending to all sizes of companies over the next three years. The rules require companies to provide their financial statements on their corporate websites in an interactive data format using XBRL at the same time their financial statements are submitted to the SEC.
Q4's new product is designed to help public companies meet the SEC XBRL regulations that require public companies to post financial statements in interactive data formats.
To respond to this mandate Q4 now offers U.S.-based filers:
* XBRL financials with real-time rendering on your website – once your XBRL filing is accepted by the SEC, within minutes your website is updated with the complete filing displayed in HTML,
* Multiple report formats for enhanced financial analysis and reporting by investors, analysts and the financial media, and
* Ability to view and download XBRL reports, or share embed code through social networks.
For more information, go to: http://www.q4websystems.com/Products/Overview/default.aspx.
Issue Date: IR Alert - July 1, 2009,
Facing the IR 2.0 Bogeyman: NBC's "Fear Factor" Ain't Got Nothing on Investor Relations and Social Media.
By Serena Ehrlich, Co-Founder, StartUp Army; Past President, NIRI Los Angeles Chapter, Dallas/Fort Worth Chapter
In the past three years, there has been a huge push for companies to get involved with social media. PR teams are practicing social media, advertising and marketing are certainly here—so what about investor relations?
Try telling an IRO that they need to start a social media program today and watch the fear flitter across their face. And for good reason: The SEC spent a good part of this decade monitoring casual conversations and sanctioning IROs for RegFD violations.
What is RegFD—the root of most IRO's fear? This law says that a company must disclose information that may impact the future price of the stock, to everyone at the exact same time. This law requires companies to maintain as much control over their messaging as possible. The penalties are severe. I don't think I know anyone in the investor relations industry willing to risk sanctions such as the ones the SEC handed down to companies like Flowserve simply to join what is still perceived as a the scary unknown of social media.
But in truth, the times are changing. Technologies are changing. The way in which people interact is changing. So despite wishes that social media is a fad, or simply a place to declare your lunch plans, or a scary place that could violate RegFD, the truth is, conversations about your company are happening online—and you can choose to be a part of it or to ignore it. But ignoring social media does not make it go away. In fact, it gives legs to untrue rumors and spreads incorrect information faster than a wildfire.
So maybe it's time to redefine social media and investor relations. After all, it is simply the way IROs have been conducting investor relations—just utilizing a new medium to both decrease the amount of time needed to educate investors and to provide clearer information to current and potential investors, decreasing the chance of rumors and short selling.
In short, social media is an easy way to clearly communicate your company story and engage with those interested via the Internet.
So how does an IRO with no time to spare (and RegFD to consider) jump into "social media" without drowning in corporate red tape? The answer: Start slowly. After all, Dell's blogs were not built in a day…
Beyond that, here are the first three steps that you must take: First, create a corporate policy to include RegFD. Second, start monitoring what is being said about you online, in conjunction with changes in your stock price. (Tip: If you have a PR team, they may have monitoring tools you can utilize). And third, consider blogging. Her are some guidelines and pointers to help get you started in these areas:
Crafting a Social Media Corporate Policy
Does your company have a corporate policy for social media? If so, has it been updated to include emerging sites like Twitter and Facebook? If not, start the ball rolling.
So why do you want a company policy and what should it include? How many times have you received a phone call from an analyst trying to solicit a slip, tip or response they could use in their research/models? Analysts can and are now looking online for that same type of insight. You need something in place to ensure topics that can affect your stock price are never discussed online.
For example: Someone in your company complains online about the slow summer at work or a client's hard won discount. These simply innocuous statements could have potentially damaging effects on your stock.
Making Moves into Monitoring
This is my favorite part of social media. By simply listening to what is being said about you online, you can determine future trends, clear up misunderstandings and your company/products, learn to spot what rumors can be quelled before your stock is affected. Plus, once you set up your search sites, this should take less than an hour a day to maintain.
Sites you should get familiar with:
• Twitter.com: Twitter is a real-time global discussion stream with no restriction on topics. No. You do not have to start Twittering today, but you should do two things: First, create a Twitter account. Reserve your company name. Just in case. Then do a search for your company name and your competitor's name. See what's being said about you. Ever wanted to run a focus group but didn't have the money? Voila. Here is your electronic focus group. To get started just go to http://search.twitter.com. Go ahead, check it now. I'll wait. Click back when you're done.
• Socialmention.com: This is a real-time search engine that searches blogs, microblogs, blog comments, images and more about your search terms. It even has a RSS feed, so you can just add it to your favorite daily reading lists.
• Quantcast.com, Alexa.com, Compete.com: Have you ever seen a negative comment online and wanted to know "who reads this stuff"? Check out these three website traffic measuring sites. I love the data that Quantcast and Alexa can provide, but find that Compete provides traffic figures for smaller blogs. Another place to look? Some blogs have an "About Us" section that provides a visitor count. This is a great way to determine the reach the site has on the Web
Hungry for more? Mashable and the Social Media Club provide great articles focused on social media tips.
Breaking into Blogs
Change your way of thinking about blogs. Traditionally blogs have been seen as time consuming and forced. Wrong. Instead, think of it as a way to answer those questions that you, your PR team, your customer service team, your management team and your board of directors get on a regular basis. By answering these questions on your website you cut down time spent on the phone and begin to interact directly with your audiences online.
So what to blog? Expand upon your FAQs, your press releases, do a Q&A with a department head, blog about new industry developments, get ahead of a potential stock slide (thus requiring you to disclose via RegFD) by using your blog to discuss and disarm potential rumors and threats. Who to blog? To make it easier, many companies create an editorial calendar, assigning articles to various department heads to ensure continual posting at minimal time spent.
And that's it! Yeah, right. That's not everything—not even close. In fact, some critics would say that is nearly not enough. But I strongly believe every IRO needs to get involved in social media and it's the first step to building a program that provides you and your audience access to real-time information about your company.
Serena Ehrlich is one of the founders of StartUp Army, a company dedicated to building Web-based businesses and handing them back for the clients to run. She is a 14 year veteran of Business Wire and past president of the National Investor Relations' Los Angeles and Dallas-Fort Worth chapters. Her love of social media came from working within the newswire industry during the birth and rise of the Internet, industry changes due to legislations such as RedFD and SOX. She can be reached at serena (at) startuparmy (dot) com.
Definitions
Accredited investor. As defined in Rule 501 under Regulation D, refers to the type of investor that is not required to receive detailed offering materials in a Regulation D offering. Generally means an individual with $200,000 in recent and expected annual income (or $300,000 when combined with one's spouse) or $1 million in net worth, a broker-dealer, bank or institution, any entity not formed for the purpose of the investment in question with at least $5 million in assets, or an entity all of whose equity owners are accredited.
Advisory Committee on Smaller Public Companies. Group established by the SEC in 2005 to review all aspects of SEC regulation of public companies with less than a $700 million market capitalization. The final report from the committee was issued in April 2006.
Affiliate. A person or entity which controls another, is controlled by another, or is under common control with another. In a corporation, affiliate status is presumed if one is an officer or director or control shareholder (generally holding at least 20 percent of the outstanding capital stock).
Aftermarket. Trading activity of a stock immediately following the event by which an operating business's stock becomes publicly tradable. More commonly referred to in connection with an IPO, but also applies following a reverse merger.
Aftermarket support. The extent to which brokerage firms and market makers and their customers participate in the aftermarket following a reverse merger or self-filing.
alternative investment market (AIM). A stock exchange based in London, England which lists stocks of companies that may not qualify for the London Stock Exchange or similar broader exchanges.
alternative public offering (APO). Somewhat misleading term used to refer to the variety of methods of going public other than an IPO. The term generally describes reverse mergers, self-filings, Rule 504 offerings, and Regulation A offerings; however, a number of these methods do not include public offerings, which is why the term is somewhat misleading.
American Stock Exchange. A major U.S. exchange where a public company's shares can trade. Listing and maintenance requirements are more stringent than on the Over-the-Counter Bulletin Board, but it is generally considered easier to list on the American Stock Exchange than on the Nasdaq or the New York Stock Exchange.
asset acquisition. One method used to complete the combination of two entities. Rather than a direct merger or share exchange, one entity, in the case of a reverse merger typically the public shell, acquires the assets of an operating business.
audit. Detailed review of a company's financial statements and performance, where thorough checks of inventory, expenses, revenues, and the like are performed by an independent certified public accounting firm. SEC rules under the Sarbanes-Oxley Act of 2002 require an audit of a public company to be performed by an accounting firm that is registered with the Public Company Accounting Oversight Board.
audited financials. The state of a company's financial statements after being approved by an auditor.
auditor. The accounting firm performing a financial audit.
backdoor registration. A method by which a company's shares can become publicly tradable through a merger directly with a public shell, after which the private operating company survives the merger and succeeds to the public status of the shell.
bankrupt shell. A public shell that has been created either through issuance of shares following a bankruptcy (these shares are publicly tradable under a provision of the Bankruptcy Code) or a public operating business that was sold or liquidated through a bankruptcy, leaving behind a public shell with virtually no liabilities.
beneficial owner. Either the record owner of securities or someone deemed to be the owner of securities under applicable SEC rules. Examples of beneficial ownership include the presumption that one owns shares which underlie currently exercisable options or warrants, or shares owned by one's spouse.
blank check. As defined in SEC Rule 419, a development stage company with no business plan or whose business plan is to merge with or acquire an operating business. Also referred to as a blank check company.
blank check company. See blank check.
blank check preferred stock. In a corporation's certificate of incorporation, it may authorize the issuance of preferred stock. If that authorization includes granting the board of directors the power to determine the rights, powers, and preferences of the preferred stock without further shareholder approval, it is known as blank check preferred stock.
blind pool. Term used by some in the industry to refer to a blank check which is raising or which has raised money.
blue sky laws. Securities laws and regulations in each of the fifty states, regulating the offering of securities in that state. According to www.investopedia.com, the term is said to have originated in the early 1900s when a Supreme Court justice declared his desire to protect investors from speculative ventures that had "as much value as a patch of blue sky."
board. See board of directors.
board of directors. Governing body of a U.S. corporation. Shareholders generally elect members of the board of directors, which is granted broad powers to elect officers such as the president and secretary and oversee a corporation's business. Also referred to simply as a board.
broker-dealer. A firm engaged in the business of effecting securities and other transactions for the accounts of others. They are required to be registered with the SEC and the NASD.
bulletin board shell. A blank check or shell company whose securities trade on the Over-the-Counter Bulletin Board.
bylaws. Set of rules governing many aspects of a corporation's business, including the process of electing officers and directors, calling and conducting meetings, and defining protocols related to shareholders and stock certificates.
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cash-and-carry shell. A shell company whose owners wish to sell most or all of the shell's ownership for cash, rather than participate as equity holders in a merger with an operating business.
cashless exercise. The right to exercise an option or warrant without paying the cash exercise price, by returning other options or warrants for their value, which is determined by subtracting the exercise price from the stock's trading price. As an example, if one holds one hundred options exercisable at $1 each, and the stock's trading price is $2, one could return 50 options as the exercise price for the other 50.
certificate of incorporation. The filing with a U.S. state's government (typically the Department of State) to create a corporation. Some states use the term articles of incorporation, and often the term charter refers to this document. Typically includes the number and type of shares of stock which are authorized, the corporation's name, and limitation of liability of corporate directors. Also referred to as a corporate charter.
change of control. A transaction pursuant to which a company's shareholdings, board of directors, and/or officers undergo a majority change. This can occur as a result of the sale of a company, the accumulation of stock by an unfriendly acquirer, or a shake-up resulting from a shareholder vote expressing dissatisfaction with a board or management's performance.
clean shell. A shell company which has no liabilities or other negative attributes as perceived by an operating business seeking to merge with it.
contemporaneous financing. A common technique in reverse mergers where an operating business combining with a shell company raises money at the same time as the completion of the merger, typically through a PIPE or other private placement.
controlling shareholders. Those who have the ability, through their ownership of shares of stock of a corporation, to approve matters required to be approved by shareholders, or to elect the board of directors.
convertible debt. Indebtedness of a corporation, the holder of which has the right to exchange or convert monies owed into stock at a negotiated price.
convertible preferred stock. Preferred stock of a corporation, the holder of which has the right to exchange or convert shares into shares of the corporation's common stock at a negotiated conversion price.
corporate charter. See certificate of incorporation.
corporate director. A member of a corporation's board of directors.
corporate officer. An individual elected by the board of directors to be an officer of a corporation. Most states require every corporation to have a president and secretary, but additional officers may be appointed and may include treasurer, vice president, chief executive officer, and chief financial officer. Individuals with titles resembling those of corporate officers are not corporate officers unless elected by the board of directors. Officers have certain fiduciary duties to the board and the corporation's shareholders.
current report. A filing with the SEC, most commonly on Form 8-K, describing an event or transaction that has taken place between the company's filings of periodic reports.
CUSIP number. An identification code issued by the CUSIP bureau identifying a class of stock. Publicly trading securities are required to have a CUSIP number.
delist. To remove a company's securities from a particular market or exchange so that they cannot trade on that market or exchange. Sometimes, a company voluntarily delists, in other cases delisting is involuntary for failure to meet a market or exchange's listing standards.
demand registration rights. The right for a holder of a company's securities to require the company, typically at the company's expense, to file and seek effectiveness of a resale registration statement including those securities.
Depository Trust Company (DTC). The custodian of records reflecting electronic representation of ownership of publicly tradable securities. DTC also serves as record owner on a company's records of all shares held electronically where a physical stock certificate has not been issued.
deregister. Commonly used term to refer to the process by which a reporting company voluntarily seeks to terminate its status as a reporting company, typically through filing of SEC Form 15, which is generally available only if a company has fewer than 300 shareholders of record. The SEC also has the power to effect an involuntary deregistration for failure to follow their regulations.
dilution. The reduction in either percentage ownership or value of one's ownership interest resulting from additional issuances of securities of a company.
dirty shell. A shell company in which it appears shady players have been involved and undertaken questionable transactions or tactics that have the effect of reducing the shell's desirability to a merger partner.
due diligence. The process of reviewing a company's operating history, assets, liabilities, risks, uncertainties, and management in anticipation of entering into a transaction with that company.
EDGAR. The SEC's Electronic Data Gathering, Analysis, and Retrieval system of filing virtually all SEC filings. EDGAR has been fully effective since 1996.
equity. Ownership of a business, whether through shares of stock of a corporation, membership interests in a limited liability company, partnership interests in a partnership, or securities granting the right to acquire any such interests.
escrow. The process by which a third party, at the request of parties to a transaction, holds money or other property as the agent of the parties, with such money or property being released pursuant to the instructions of the parties.
exemptions from registration. The opportunity for securities of a corporation to be sold publicly without being registered with the SEC. The most common exemption is Rule 144.
exit strategy. Term used by venture capitalists and private equity investors referring to the method by which they might liquidate an investment in a company.
fairness opinion. Advice from an independent third party that a particular transaction is fair from a financial point of view. Typically, this advice provides a board of directors with greater comfort as to the value of a transaction, and is particularly helpful when members of the board or shareholders have a conflict of interest in the transaction.
firm commitment underwriting. Public offering of securities in which the underwriter agrees to purchase all securities offered by the company. It then resells the securities to its customers after having purchased the shares at a discount from the company. Distinguished from best efforts underwriting, whereby the underwriter simply promises to use its best efforts to resell the shares.
float. Shares of a publicly held company that are tradable by the public. Most definitions of float exclude shares held by officers, directors, and other affiliates. Also referred to as public float.
follow-on offering. Sale of a company's securities to the public after the company is already public by way of an event such as either an IPO or reverse merger.
Footnote 32. Note in the SEC's June 2005 reverse merger rulemaking which acknowledges a questionable tactic whereby individuals take supposedly operating companies public with the intention of shutting down or spinning off the business upon a reverse merger. This allows the promoter to avoid Rule 419 restrictions. The SEC declares these entities shell companies.
Footnote 32 shell. Shells created when individuals take supposedly operating companies public with the intention of shutting down or spinning off the company upon a reverse merger. This allows the promoter to avoid Rule 419 restrictions. The SEC declared these entities as shell companies in its June 2005 rulemaking.
Form 10-K. Annual report filed with the SEC by a company that does not qualify to report under Regulation S-B. Includes detailed company information and three years of audited financials.
Form 10-KSB. Annual report filed with the SEC by a company that qualifies to report under Regulation S-B. Includes detailed company information and two years of audited financials.
Form 10-SB. Registration statement under the Securities Exchange Act of 1934 which registers a class of securities with the SEC but does not register any individual shares for public sale. After effectiveness of the filing, the company is an SEC reporting company.
Form 10-SB registration. The process of filing and seeking effectiveness of Form 10-SB. Filing is automatically effective sixty days after filing. If SEC comments are outstanding after sixty days, they are dealt with through a post-effective amendment.
Form 10-SB shell. Shell company created by filing Form 10-SB on behalf of previously private shell. Creates a clean but nontrading shell.
Form 15. Filing with the SEC undertaken to deregister.
Form 211. Filing with the NASD undertaken by a market maker to commence trading of a company's securities on the Pink Sheets or Over-the-Counter Bulletin Board.
Form 8-A. Simple SEC filing under the Securities Exchange Act of 1934 after which a company is an SEC reporting company, in lieu of using the more complex Form 10-SB. Can only be used by the end of the first fiscal year after a company completes a registration under the Securities Act of 1933, or under certain other limited circumstances.
Form 8-K. Current report required to be filed by reporting companies between periodic reports when certain material events occur, including a reverse merger. The timing of filing was made shorter and the scope of items covered was made more comprehensive following implementation of the Sarbanes-Oxley Act of 2002.
Form D. Required filing made with the SEC under Regulation D describing a private placement whose issuer is claiming an exemption from registration pursuant to Regulation D.
Form S-1. Primary form of registration of securities under the Securities Act of 1933 for companies that do not qualify to report under Regulation S-B.
Form S-4. Form of registration of securities under the Securities Act of 1933 when securities are issued pursuant to combination transactions and upon other events.
Form S-8. Simplified form of registration of securities under the Securities Act of 1933, utilized if securities are issued pursuant to a stock option or other employee benefit plan, or issued to consultants or other advisers. Shell companies may not utilize Form S-8.
Form SB-2. Primary form of registration of securities under the Securities Act of 1933 for companies that qualify to report under Regulation S-B.
Form SB-2 resale registration. Registration of previously issued securities on behalf of owners wishing to be permitted to publicly resell the securities. Used by companies that qualify to report under Regulation S-B.
forward stock split. A process by which each share of a company's stock of is multiplied and increased on a pro rata basis among all shareholders. For example, a company with 100 shares outstanding that completes a two-for-one forward stock split would have 200 shares outstanding following the forward stock split.
founder stock. Shares of a company issued to its original management and investors who started the business.
franchise tax. Annual levy payable to a state in which a corporation is incorporated or doing business.
free-trading shares. Shares of stock in a corporation that have been registered with the SEC for sale or resale or which are able to be traded pursuant to an exemption from registration.
fully reporting company. See reporting company.
general solicitation. Seeking interest from the public at large for an offering either through advertising or some type of mass communication. For a private placement to qualify for the exemption from registration under Regulation D, no general solicitation may take place.
good standing. Status of a corporation in a particular state as both existing (or qualified to do business as applicable) and up to date on paying franchise taxes and completing certain filings which the state may require. A corporation may not effect certain transactions without being in good standing.
go private. Seeking to stop being a reporting company through filing of Form 15, if available, or seeking effectiveness of a filing with the SEC called Schedule 13E-3, describing a plan for qualifying to file Form 15.
grandfathered shells. Shell companies and blank checks which were formed and taken public prior to the passage of Rule 419 were permitted to continue to exist without the restrictions of Rule 419.
hedge. To protect an investment by using certain financial, legal, or trading techniques which generally limit both the gain and potential loss of the investment.
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information statement. Filing with the SEC in lieu of a proxy statement where shareholder approval is to be obtained on a matter but proxies are not being requested or solicited, because the requisite number of shareholders either has already approved the matter or is expected to approve the matter at a meeting.
initial public offering (IPO). The process of going public through an offering of securities by a corporation to the public and filing and seeking effectiveness of a registration statement under the Securities Act of 1933.
insider filings. Reports that are required to be filed with the SEC by officers, directors, and at least 5 percent shareholders of reporting companies. Such filings include information about securities holdings or changes in holdings.
insider trading. Technically includes all purchases and sales of shares of a company's stock by officers, directors, and affiliates, but more commonly is used to refer to illegal trading by these insiders or others based on possession of material nonpublic information.
intrastate exemption. Allows shares of a corporation located and incorporated in one state to offer securities within that state in a manner which is exempt from SEC registration. Such an offering may require state registration.
Investment Company Act of 1940. Federal statute passed to regulate mutual funds and other entities established to invest in securities. Most hedge funds operate pursuant to an exemption from regulation under this Act.
investor relations (IR). The process by which a company seeks to garner positive attention from broker-dealers and others in a position to influence investment in the company's public stock. Also includes day-to-day dealings with existing shareholders of a company.
IPO window. The period of time in which IPOs are popular with investors and available to private companies seeking to become public through an IPO. The IPO window is described as open during periods of popularity, and otherwise closed.
junior SPAC. Proposed type of SPAC raising a minimal amount of money to qualify for a Rule 419 exemption, and avoiding shareholder reconfirmation of investment, short time limit, and mandatory industry focus.
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liquidity. The ability to easily sell or purchase a public company's securities. Also an often-cited benefit of being a public company.
listed stock. A company's stock which is tradable on a major market or exchange such as the New York Stock Exchange, American Stock Exchange, or Nasdaq.
manufactured shell. A shell company created from scratch for the purpose of being a shell company.
market capitalization. The perceived value of a public company calculated by multiplying a company's per-share trading price by the number of total shares of stock outstanding. Also referred to as market cap.
market maker. A broker-dealer that agrees to make a market in a Pink Sheet or Over-the-Counter Bulletin Board stock. Stocks may not trade on these markets without a market maker. A market maker is required to complete transactions from its own account if it is not able to find another party to complete a transaction.
market support. The extent to which brokerage firms, market makers, and their customers participate in the market for a company's stock following an IPO, reverse merger, or self-filing.
merger. A process by which two U.S. corporations combine, with one corporation continuing as the surviving entity and the other disappearing as the nonsurviving entity. Shares of stock of the nonsurviving entity typically are exchanged for shares of the surviving entity or a parent company of the surviving entity.
merger proxy. A complex filing with the SEC in which one party to a merger is a reporting company.
messy shell. A shell company with records that are difficult to obtain and transactions that are not easy to verify. As distinguished from a dirty shell, no unsavory activity is suspected.
Nasdaq. The National Association of Securities Dealers Automated Quotation System includes two trading markets, one known as the Nasdaq National Market and a lower-level market known as the Nasdaq SmallCap Market. Nasdaq also owns and operates the Over-the-Counter Bulletin Board, or OTCBB.
National Association of Securities Dealers (NASD). All broker-dealers must be members of the NASD, which regulates and oversees the operations of broker-dealers.
new listing application. Application made to a market or exchange seeking for the first time for a company's securities to be listed on that market or exchange. The application is typically subject to the market or exchange's new listing standards.
New York Stock Exchange. Considered the most prestigious U.S. stock exchange, with the most stringent listing and maintenance standards.
no-action letter. A publicly available letter from the staff of the SEC indicating that the staff will recommend no enforcement action against the addressee if it follows a certain course of action. Each letter declares it cannot be relied on by others, but most practitioners consider them as having quasiprecedential value.
nonaccredited investor. A purchaser of shares that does not meet the definition of accredited investor.
nonreporting company. A company that either is not subject to the SEC's reporting requirements under the Securities Exchange Act of 1934 or which is subject to the requirements but is not current in its required filings.
nontrading shell. A shell company whose shares do not trade or cannot trade until after a reverse merger.
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offering. The process by which a company seeks buyers for its securities, or by which a holder of securities seeks buyers of those securities.
option. The right to purchase securities (typically common stock) of a company for a fixed period of time, generally for a predetermined price.
overhang. The existence of derivative securities such as preferred stock, warrants, or options which may be converted into or exercised for shares of common stock, thereby increasing the number of shares outstanding upon such conversion or exercise.
Over-the-Counter Bulletin Board (OTCBB). A trading market most commonly used following a reverse merger, as its listing and maintenance requirements are minimal, other than being a reporting company. Most OTCBB stocks are not heavily traded.
penny stock. In the Penny Stock Reform Act of 1990, it was defined as "any stock which is not selling on a major exchange and has a purchase price of less than $5 per share." Most post-reverse merger stocks are initially penny stocks when they begin trading.
penny stock market. Typically refers to the trading activity in lower-priced stocks on the Over-the-Counter Bulletin Board or Pink Sheets.
Penny Stock Reform Act of 1990 (PSRA). Following abusive practices in the penny stock market, Congress mandated more disclosure to purchasers of penny stocks and more information be gathered by broker-dealers from customers who are purchasing penny stocks. The PSRA also directed the SEC to pass a rule which ultimately became Rule 419.
piercing the corporate veil. The ability in a corporation to successfully sue shareholders for debts of the corporation if the corporation is effectively an alter ego of the shareholder.
Pink Sheets. A centralized quotation service that collects and publishes market maker quotes for Over-the-Counter securities. Unlike the OTCBB, issuers do not have to be fully reporting companies with the SEC for their shares to be quoted on the Pink Sheets.
pink sheet shell. A shell company whose shares trade on the Pink Sheets.
post-effective amendment. An SEC filing effecting changes or updates in a registration statement after it becomes effective. Rule 419 requires a post-effective amendment to disclose information about the company proposed to be merged into a shell.
post-money valuation. The value of a company immediately after it completes a financing. Generally calculated by adding the amount of financing to the pre-money valuation.
preferred stock. A class of securities in a corporation generally higher in the capitalization structure than common stock, often with special rights or privileges.
pre-money valuation. The value of a company immediately before it completes a financing.
primary registration. A registration statement filed on behalf of a company seeking for it to register its shares for a public offering.
private company. A company that has not conducted a public offering nor become a reporting company.
private equity. A somewhat amorphous term referring generally to a source of financing that involves a private placement.
private investment in public equity (PIPE). A private placement of equity or equity-linked securities effected for a public company, typically with immediate required registration of the equity sold to the investor.
private offering. Offering of securities by a company or a holder of securities that does not involve a public offering. Also referred to as a private placement.
private placement. See private offering.
private placement memorandum (PPM). A detailed offering document that describes a company's business strategy, financial performance, risk factors and the like, which is utilized in a private offering.
promoter. Entity or person that controls a shell and is actively seeking a private operating company with which to merge. A promoter can also be any investment bank or broker otherwise promoting a deal.
prospectus. Document used for public offering by issuer or shareholders including information required by SEC rules, in form and content approved by the SEC and contained in a larger filing known as a registration statement.
proxy statement. Mailing to shareholders of reporting company in form and content approved by the SEC in accordance with proxy rules. Required when a shareholder meeting is planned and management or another party is soliciting proxies from shareholders. The proxy, or individual designated by the shareholder, appears at the meeting on the shareholder's behalf and votes the shareholder's shares in a predesignated manner.
public company. A company that either has conducted and completed a public offering or has otherwise become a reporting company. May include either a company that has completed a public offering but is not a reporting company or a company whose shares do not trade.
Public Company Accounting Oversight Board (PCAOB). Established by the Sarbanes-Oxley Act of 2002, the body that oversees accounting and auditing of reporting companies. An auditor must be registered with the PCAOB to perform an audit of a reporting company. PCAOB establishes rules for auditors, audits all accounting firms which audit more than one hundred reporting companies, and randomly audits all others.
public float. See float.
public offering. The process by which a company seeks to offer and sell its securities to the public, as opposed to a limited distribution of securities as in a private placement. Also refers to the process by which a shareholder may seek to offer shares of a company other than in a private placement. Public offerings typically require registration with the SEC.
public relations (PR). The process by which a company seeks to obtain broad awareness and knowledge of its product or service offerings or of other news concerning the company, often with the assistance of a public relations firm or similar expert and through the issuance of announcements or press releases.
public shell company. See shell company.
public venture capital. Often used to refer to a private placement accompanying a reverse merger. Relates to the fact that the investment risk is often similar to a venture capital investment, except that the investment is into a public company.
pump and dump. Illegal practice by unsavory investors or broker-dealers in which misleading or false information is provided to the marketplace, causing a stock's price to rise, upon which questionable players sell their stock. After this, true information becomes available and the stock price generally returns to its prior lower level.
qualified institutional buyer (QIB). An entity, acting for its own account or the accounts of other qualified institutional buyers, that in the aggregate owns and invests on a discretionary basis at least $100 million in securities of issuers that are not affiliated with the entity.
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reconfirmation prospectus. Under Rule 419, prior to completing a reverse merger, the shell must prepare and have approved by the SEC a prospectus containing detailed information concerning the private company merging into the shell. This prospectus is delivered to purchasers in the shell's IPO, 80 percent of whom must reconfirm their investment after reviewing the prospectus before the merger can be completed. Those who do not reconfirm receive their investment back, less expenses.
registered broker-dealer. See broker-dealer.
registered stock. Shares of a company's capital stock that have been registered with the SEC either for sale by the company to the public or for resale by a shareholder to the public.
registration. The process of obtaining approval from the SEC for a public offering of securities of a company or shareholder by following the SEC's rules for required disclosures in connection with registering individual shares either for sale by a company to the public or for resale by a shareholder to the public.
registration statement. A filing required by the SEC in form and content approved by the SEC in order to effect the registration of shares.
Regulation A. This SEC regulation permits offerings of up to $5 million to an unlimited number of investors, whether or not accredited. An offering circular is prepared and approved by the SEC, but the form is more streamlined than a full registration statement and does not require audited financial statements.
Regulation D (Reg D). Passed in 1982, this SEC regulation offers a safe harbor ensuring that an offering is a private placement and exempt from registration. The most common exemption used is contained in Rule 506, which permits an unlimited amount of money to be raised to all accredited investors and up to thirty-five unaccredited investors. No specific information delivery is required to accredited investors, but nonaccredited investors must receive all information that would be in a public offering prospectus, unless the information is not material.
Regulation S (Reg S). This SEC regulation provides for an exemption from registration for securities offerings by U.S. companies if they are completely or partially from foreigners or by a foreign company, if raising money completely overseas where some directed selling efforts take place in the United States. No specific information delivery or accredited investor status applies.
Regulation S-B. This SEC regulation outlines disclosure requirements for smaller companies in the small business filing system, generally permitting less information in its offerings and periodic reports. A company fits the S-B system if it has revenues of less than $25 million, is a U.S. or Canadian issuer, is not an investment company or asset-backed issuer, and its parent (if a subsidiary) is also a small business issuer. Also, if the company has a public float (held by nonaffiliates) of $25 million or more, it would not fit into the S-B filing system. The regulation may be amended or even overhauled by SEC Advisory Committee on Smaller Public Companies.
Regulation S-K. This SEC regulation, which predates Regulation S-B, outlines disclosure requirements for companies that do not fit into the Regulation S-B system.
Regulation S-T. This SEC regulation provides requirements for SEC filings made electronically through the EDGAR system.
reporting company. A company which is obligated to file periodic and current reports with the SEC as a result of a recent public offering or voluntary registration under the Securities Exchange Act of 1934.
representations. Statements of fact concerning a company, generally provided in an agreement to reassure third parties and allow them to rely on the statement. For example, "The Company has 10 million shares of common stock outstanding."
resale registration. Effecting a registration of shares held by individual shareholders to permit their resale in the public market. Technically the registration is made on behalf of the selling shareholders, but typically the company prepares and handles the filing.
restricted stock. Shares of capital stock of a company which are not registered or which are not able to be sold in the public market through an exemption from registration.
reverse merger. A method by which a private operating company arranges for its stock to be publicly traded following a merger or similar transaction with a publicly held shell company, pursuant to which the equity owners of the private company typically take control of the former shell company.
reverse stock split. A pro rata reduction in the number of shares of capital stock of a company that are outstanding. Typically requires approval of a majority of shareholders. Often used to increase per-share price, or to make more authorized shares available in order to complete a reverse merger.
reverse takeover (RTO). Another term sometimes used for reverse merger.
reverse triangular merger. A reverse merger in which the public shell company creates a wholly owned subsidiary, and which subsidiary merges with and into the private company seeking to merge. As a result, the private company becomes a wholly owned subsidiary of the public shell company. Typically used to avoid shareholder approval at the level of the shell company and to allow the operating business to maintain its corporate existence.
round lot shareholders. Equity owners of a public company that hold at least 100 shares.
Rule 10b-5. This SEC rule, under the Securities Act of 1933, forbids intentionally and materially misleading a third party in connection with the purchase or sale of a security.
Rule 144. This SEC rule, under the Securities Act of 1933, provides a popular exemption from registration, allowing otherwise restricted securities to be sold in the public market if they have been held for a sufficient period of time, typically at least one year and in some cases two years.
Rule 144A. This SEC rule permits qualified institutional buyers, or QIBs, to trade restricted securities between and among themselves and allows for broader exemptions from registration for those offering securities to QIBs.
Rule 419. This SEC rule, passed in 1992, requires significant safeguards in connection with an IPO or other registration under the Securities Act of 1933 of shares of a blank check. These safeguards include requiring almost all funds raised and shares issued to be placed in escrow pending a merger, an eighteen-month time limit to complete a merger, investor reconfirmation of their investment prior to a merger, and other requirements. An IPO is exempt from this rule if it raises more than $5 million, as a result of which all SPACs are exempt from Rule 419.
Rule 419 shell. A shell company or blank check created through an IPO conducted under Rule 419.
Rule 504. This SEC rule, part of Regulation D, permits up to $1 million to be raised by a private company from an unlimited number of accredited and nonaccredited investors, with no information delivery requirements and the ability of the shares to trade unrestricted following such offering. Most states do not permit Rule 504 offerings.
SAFE (China's State Administration of Foreign Exchange). Chinese regulatory agency that oversees foreign exchange and briefly sought to limit or restrict reverse mergers involving Chinese companies.
Sarbanes-Oxley Act of 2002 (SOX). The largest and broadest change in U.S. securities laws since 1934, SOX shortened reporting times for most companies' periodic reports and insider reports, mandated establishment and maintenance of internal financial controls, added corporate governance requirements, in particular with respect to oversight of a company's audit, eliminated all extension of credit to executives, and required top executives to certify as to the material correctness of their financial statements.
Schedule 13D. SEC filing required to be made by any holder of at least 5 percent of a reporting company's stock if it is part of management or if the holder may seek to effect or influence management.
Schedule 13G. SEC filing required to be made by any holder of at least 5 percent of a reporting company's stock if it is not part of management and if the holder does not seek to effect or influence management, or meets other criteria.
Schedule 14F. SEC filing required to be made and mailed to shareholders if, pursuant to a transaction involving at least 5 percent of a reporting company's stock, there is an arrangement or understanding to effect a change in a majority of the board.
scrubbing a shell. Typically refers to the process of completing a thorough due diligence review of a shell and solving problems that arise during that process.
SEC Advisory Committee on Smaller Public Companies. Established in 2005, the committee is charged with reviewing all aspects of SEC regulation of companies with revenues of less than $700 million. Its report was completed in April 2006.
SEC comments. Most registration statements are reviewed by the SEC, which provides comments to the issuer recommending changes or additional disclosure in the registration statement.
SEC Division of Corporation Finance. The division of the SEC charged with overseeing reporting companies and offerings of securities.
SEC examiner. An individual, typically within the SEC Division of Corporation Finance, who takes primary responsibility for reviewing and commenting on an SEC filing.
SEC filing. Any document formally submitted to the SEC under its rules.
SEC Office of Small Business Policy. Part of the SEC Division of Corporation Finance, which develops and assists in implementation of the SEC's policies that relate to smaller businesses.
SEC Reverse Merger Rulemaking in 2005. In June 2005, the SEC passed a new set of rules directly effecting reverse mergers, which became fully effective in November 2005. In addition to requiring substantial disclosure about the fully merged company within four business days after completing a reverse merger with a shell company, the rule requires every single reporting company to declare whether it meets a newly created definition of shell company. The rule also eliminated the use of Form S-8 by shell companies.
secondary offering. A public offering by a company's shareholders.
Section 404 of the Sarbanes-Oxley Act of 2002. The section of SOX mandating the establishment and maintenance of internal financial controls in certain reporting companies.
Securities Act of 1933. The first law regulating the securities markets passed during the Great Depression and regulating the offering of securities.
Securities and Exchange Commission (SEC). See U.S. Securities and Exchange Commission (SEC).
Securities Exchange Act of 1934. The follow-up to the Securities Act of 1933 established the SEC and set up the integrated disclosure system, along with regulation of broker-dealers, tender offers, and proxy solicitation.
self-filing. The process by which a private company may seek a public trading market for its securities without an IPO or a reverse merger, by completing its own filings with the SEC either to resell securities held by shareholders or to voluntarily become a reporting company.
share exchange. One method of completing a reverse merger by simply exchanging shares of the public shell company for shares of the private company seeking to merge.
shareholder approval. The process by which consent of shareholders is required under applicable state corporate law in the state where a corporation is incorporated.
shareholder base. The number of holders of shares of stock of a corporation.
shareholder rights certificate. A certificate sometimes used to represent the right to receive shares of stock of a company following a reverse stock split, increase in authorized shares, or other recapitalization.
shareholders of record. Holders of capital stock of a company holding physical stock certificates issued by the company's transfer agent. Does not include holders of capital stock who possess only electronic representation of shares through the Depository Trust Corporation.
shares authorized. The number of shares of a class of stock a corporation is permitted to issue pursuant to the corporation's certificate of incorporation.
shares issued. The number of shares of a class of stock a corporation has issued to holders, including shares which may have been redeemed or repurchased by or forfeited to the corporation and not cancelled and are no longer outstanding.
shares outstanding. The number of shares of a class of stock a corporation has issued to holders, excluding shares that may have been redeemed or repurchased by or forfeited to the corporation.
shell broker. An individual or entity who assists parties seeking to purchase or merge with a shell company by identifying and negotiating transactions with shell managers.
shell company. A company with no or nominal assets (other than cash) and no or nominal operations. Also referred to as a public shell company.
shell merger. A reverse merger or similar transaction effected with a shell company.
shell promoter. See promoter.
short selling. The selling of a security that the seller does not own, or any sale that is completed by the delivery of a security borrowed by the seller. Short sellers assume that they will be able to buy the stock at a lower amount than the price at which they sold short.
short swing profit rule. Under Section 16 of the Securities Exchange Act of 1934, this SEC rule states that an officer, director, or 10 percent shareholder of a reporting company may not purchase and then sell, or sell and then purchase, any shares of the company's stock within a six-month period and retain profits from the transaction.
specified purpose acquisition company (SPAC). A blank check that completes an IPO pursuant to an exemption from Rule 419 for companies raising more than $5 million. SPACs generally have an industry focus with a related management team, and adopt several of the Rule 419 restrictions to assist in attracting investors.
stock. A form of equity ownership in a corporation.
stock option. The right to purchase stock for a specified period of time and typically for a specified price.
stock split. A pro rata increase or decrease in the number of shares outstanding, typically requiring shareholder approval.
street name. Common term for holding shares electronically through the Depository Trust Corporation rather than through a physical stock certificate.
subsidiary. An entity that is owned more than 50 percent by another entity.
super Form 8-K. Term used to describe the current report required to be filed following a reverse merger with a shell company and including the same information that would be included in a Form 10-SB for the merged company. Also called a super 8-K.
super 8-K. See super Form 8-K.
thin trading. Common criticism of post-reverse-merged companies or trading shells, which is that only limited stock trading exists.
trading shell. A shell company whose common stock may be publicly bought and sold on an established market or exchange.
transfer agent. Transfer agents keep a company's stock records, issue stock certificates when appropriate, help conduct a company's annual meeting by providing inspection services and current lists of shareholders, and help with stock splits, stock dividends, and similar changes.
unaccredited investor. See nonaccredited investor.
unclean shell. Broad term meant to encompass either a dirty shell or a messy shell.
underwriter. Broker-dealer that serves to complete an IPO of a company by purchasing shares from the company at a discount and then reselling them to the broker-dealer's customers.
unregistered broker. Individual or entity performing functions normally required of a registered broker-dealer but which is not registered with the SEC or NASD.
unregistered stock. See restricted stock.
U.S. Securities and Exchange Commission (SEC). The administrative agency established by the Securities Exchange Act of 1934, which implements securities laws and establishes and enforces rules and regulations under those laws.
valuation. Process of determining the worth of a company or worth of a share of stock.
variable interest entities (VIEs). Entities that, under IRS regulations, must consolidate their financial statements as a result of a close relationship between the entities.
venture capital. Financing source for early-stage and emerging, typically private companies.
voluntarily reporting company. Company which is not required to provide reports like a reporting company but chooses to do so anyway.
warrant. A security that entitles the holder to purchase another security (typically common stock) at a specified price during a specified time period.
warranties. A promise that something is in a certain state or condition. For example, "All our inventory is in saleable condition," or, "We have complied with all applicable laws concerning our pension plan." They are typically provided along with representations in reverse merger agreements.
wholly foreign-owned enterprise (WFOE). Entity permitted by Chinese regulations to be owned by foreign entities or nationals.
wholly owned subsidiary. A subsidiary all of whose equity ownership is held by one entity.
NIRI Member Benefits Provide Savings and Value
It pays to belong! In addition to information, education, community, and advocacy, member receive special savings. These programs and discounts are available exclusively to you as a member:
Career Transition Program
The NIRI Career Transition program assists members who become unemployed, suspending national membership dues for up to twelve months. For program details, go to: http://www.niri.org/mem_service_area/career_transition.cfm
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FINRA Webinars
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FINRA webinars are live, interactive, online programs delivered right to your desktop. These 60-minute streaming audio presentations are ideal for compliance professionals who want to listen to and interact directly with industry experts. Webinars include panel discussions with FINRA staff and/or industry experts, and feature online resource materials that participants can access from their own computers. Audience members can choose to participate in the live, real-time versions of the programs or listen to the "on-demand" versions at a later date.
Webinars start at 1:30 pm, Eastern Time, the third Wednesday of every month, beginning in March 2009.
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Anti-Money Laundering: Independent Testing (Small Firm Series) • June 17, 2009
Current Market Impacts on Fixed Income Compliance • July 15, 2009
Changes to a Firm's Continuing Membership Application • September 16, 2009
FINRA Supervision Rules • November 18, 2009
Current Issues in Advertising Regulation • December 16, 2009
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Webinars
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FINRA podcasts are short online audio recordings that highlight news, regulatory updates and other compliance topics.
http://www.finra.org/Industry/Education/OnlineLearning/index.htm
In the area of public disclosure of short positions (one of NI RI’s priority financial regulatory reform issues), SEC Commissioner Aguilar indicated, “Some public disclosure of short selling positions is appropriate.” I will be meeting with Commissioner Aguilar in mid-May on this and other proxy matters, but am very pleased as this public pronouncement may mean the SEC is warming to improved disclosure of positions (long or short) to issuers.
Mission
NIRI is dedicated to advancing the practice of investor relations (IR) and professional competency and stature of its members.
Priority Advocacy Issues
• NIRI supports equity ownership position transparency – full and frequent ownership disclosure by all institutional investors (mutual funds, hedge funds, activist investors, etc.) including:
o Long equity positions
o Short equity positions
o Derivative positions
• NIRI supports a comprehensive evaluation of the current shareholder voting and communications system in order to modernize the corporate governance processes used by public company shareholders.
• NIRI supports a comprehensive evaluation of market stabilizing systems and processes during times of extreme volatility including some form of short selling circuit breakers during these periods.
Background
Ownership Transparency
NIRI supports the need for greater transparency within the investment community, favoring a reporting regime that promotes more timely and frequent long position reporting, as well as commensurate full and fair short position disclosure.
Public companies should expect the same level of disclosure from all institutional investors (investment funds, hedge funds, activists etc.) maintaining a short position in their stocks as are required of the funds that are long investors of their stocks. Investment managers are currently required to publicly file periodic reports disclosing only their long equity positions – not their short positions. The SEC’s recent temporary order concerning short position disclosure requires confidential short position reporting to the U.S. Securities and Exchange Commission (SEC), and does not contemplate making these filings publicly available. NIRI sees no reasonable basis for the different long and short disclosure requirements of all institutional asset managers, including hedge funds.
Public companies currently operate in an environment of great transparency governed by federal, state and stock exchange rules and regulations. Current SEC rules generally require institutional investors to disclose share ownership
positions on a quarterly basis (Form 13F), with an exception made for those that petition the SEC to delay these disclosures on the basis of confidentiality. Quarterly reporting was established many years ago before technology advances made reporting much easier. It seems proper that the reporting schema should be similar to what now occurs with retail investors - receiving investment reports on a monthly basis within ten days of the end of the month. Institutional holders should abide by the same frequent public reporting scheme and abandon the quarterly requirement. Reporting rules should be strictly enforced with meaningful penalties for non-compliance.
Shareholder Communications
More than 75% of the shares of public companies are held in "street name," meaning that they are held in the name of a third-party financial intermediary, such as a broker or a bank. This system ensures an efficient transfer of shares among owners and promotes liquidity in our capital markets.
Unfortunately, short selling practices, complex derivative transactions, empty voting and an outdated process for shareholder voting are now challenging the integrity of the corporate election system. Brokers and other financial institutions are not able to accurately account for shares that are entitled to vote on important corporate matters. Hedge funds and other financial players are using share lending and swap transactions to separate economic interest from voting rights, in order to influence the results of a shareholder meeting. Empty voting and the use of “pump and dump” schemes that offer the opportunity to manipulate corporate governance affairs and stock prices should be prohibited.
The current shareholder voting and communications system is more than 30 years old and needs to be updated and reformed. Public companies are not able to use modern technology to communicate with individual investors who own shares in their enterprises. For the protection of individual investors and other participants in our capital markets, the SEC should be directed to initiate a comprehensive evaluation of the current shareholder voting and communications system, focusing on the following:
1. Direct Communications with Individual Investors. The SEC should eliminate the NOBO/OBO (non-objecting beneficial owner/objecting beneficial owner) distinction in order to give companies access to contact information for all of their beneficial owners and to permit companies to communicate with them directly. Shareholders desiring to remain anonymous should bear the cost of maintaining their own privacy, such as through the establishment of nominee accounts.
2. Voting By Retail Investors. The SEC should examine how to protect the vote of the retail investor, particularly in the case of unvoted shares. Institutional investors generally vote 100% of the time in order to meet their legal responsibilities. This voting is facilitated by electronic systems, and also aided by third-party proxy advisory services. Retail investors have no similar voting facilitators or proxy advisory services, and, in fact, often have no motivation to vote their shares. Among the alternatives that the SEC should consider to protect the interests of retail investors are: pass through of voting rights directly to beneficial owners, client directed voting and customer choice voting.
3. Competition Among Proxy Service Providers. Brokers, banks, and other intermediaries should not stand in the way of direct communications between companies and the beneficial owners of their securities. Companies should have the ability to determine the distributors of their communications, and should not be forced to pay for the costs of a system in which the fees and service providers are determined by third parties.
4. Proxy Voting Integrity. The SEC should consider additional steps to ensure that the proxy voting system is transparent and verifiable. The SEC should examine its ownership disclosure rules and require disclosure of both voting and economic ownership in respect to both long and short positions.
5. Proxy Advisory Services. The SEC should review the role of proxy advisory services and the procedures used by these firms in generating recommendations.
Refer to www.shareholdercoalition.com for more information on shareholder communications issues.
Short Sale Circuit Breakers
NIRI supports a comprehensive evaluation of market stabilizing systems and processes (circuit breakers) during times of extreme volatility including some form of short selling circuit breakers during these periods. NIRI urges the SEC to either reinstate the short-sale uptick rule (eliminated in 2007), or implement a new short-sale circuit breaker rule in order to enhance market stability in times of extreme market volatility.
Regarding short sales, NIRI issued a press release (pdf) yesterday announcing the results of our recent short selling member survey. NIRI survey respondents overwhelmingly favor additional reforms to ensure short selling is not abused. Today, I am attending an SEC roundtable meeting on this issue, and will report next week on the discussion. In the next few weeks, NIRI will submit public comments on the SEC’s proposed REG SHO short sale amendments (pdf). This past week, NIRI submitted comments (pdf) to IOSCO (International Organization of Securities Commissions) in response to its request for public comments on a short selling consultation report (pdf). I expect similar letters to be submitted by other peer international IR organizations as NIRI’s response was developed in coordination with several members of GIRN (Global Investor Relations Network) – an organization of global IR organizations
NEWS RELEASE
For Immediate Release: May 4, 2009
NIRI Survey Respondents Strongly Support SEC’s Proposed Short Sale Reforms
Vienna, VA – The National Investor Relations Institute (NIRI), the largest association of public company investor relations professionals in the world, today announced that a significant majority of members responding to a recent survey support short sale reforms, including those contained in the proposed amendments to Regulation SHO by the U.S. Securities and Exchange Commission (SEC).
NIRI conducted a member survey from April 23, 2009 to May 1, 2009 to aggregate their opinions and experiences regarding short selling. Approximately 7.5%, or 295, NIRI members participated in the survey. The results indicate strong support for short sale reforms among survey respondents:
• 91% favor a market-wide short sale uptick rule
• 71% favor a single-stock short sale circuit breaker
• 90% favor making the temporary prohibition of “naked” short sales permanent
• 96% favor public short position reporting similar to long position reporting
“NIRI applauds the SEC for taking up this comprehensive examination of short-selling,” said Jeff Morgan, President and CEO of NIRI. “NIRI agrees with the Commission that short selling provides important market benefits such as liquidity and pricing efficiency, but that short selling may also be used to illegally manipulate stock prices. NIRI supports a comprehensive evaluation of market stabilizing systems and processes during times of extreme volatility such as some form of short selling uptick rule or circuit breakers. Additionally, NIRI supports equity ownership position transparency – full and frequent ownership disclosure by all institutional investors including long positions, short positions and derivative positions. We plan to include these important survey results in NIRI’s upcoming Reg SHO comment letter to the SEC.”
NIRI Events
“Tighten Up: A Year (or more) of Consolidation in Semi & Solar”
Date: May 5, 2009
StartTime: 05:00 PM
EndTime: 06:00 PM
TimeZone: Eastern Daylight Time
Speaker: Mario Morales, IDC (Industry Analyst)
Brett Hodess, Bank of America (Equity Research)
Speaker: Mark Edelstone, JP Morgan (Investment Banking)
Contact: Mike Hyatt
Phone: 703-506-3569
Email: mhyatt@niri.org
Location: At your location
Cost: Members: 0.00
Non-Members: 100.00
Description: The semiconductor and solar industries are both experiencing the pain of a worldwide economic downturn and strained financial markets. This one-hour webcast will examine the potential for consolidation within these respective supply chains. Our goal is to provide IROs with a framework to better understand this industry dynamic and its impact on corporate valuation and investor behavior.
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One of my favorite trading authors is going to be giving a seminar there (Alexander Elder):
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That's exactly how I answered them as well (all "yes").
Thanks buy
My answers
1)yes, but I don't think it does any good because if your a big enough player you can short the box so to speak. What I mean by this is you can create the uptick then short it.
2)Single stock circuit breaker rule should be enforced yes. Washinton mutual
3)Yes.
4)Yes.
NIRI Survey (please feel free to post opinions)
1. Regarding restrictions on short sales, are you in favor of a market-wide uptick rule?
2. Regarding restrictions on short sales, are you in favor of a single stock circuit breaker rule?
3. Do you believe that the SEC's current temporary rules prohibiting the practice of “naked” short selling should become permanent?
4. Do you believe there should be some type of public reporting of short positions similar to current reporting of long ownership positions?
5. If applicable, please provide any examples of a positive or negative effect on your organization’s stock resulting from the temporary ban on “naked” short selling or any other comments regarding short sales that may be included in NIRI’s SEC public comment letter.
NIRI Short Selling Survey
Background:
The SEC is considering imposing new short sale restrictions by amending Regulation SHO, and is proposing two approaches:
The first approach is a price test (“uptick rule”) that would apply on a market wide and permanent basis.
The SEC believes a price test will help restore investor confidence by allowing relatively unrestricted short selling in advancing markets, while restricting short selling at successively lower prices and thereby potentially helping prevent abusive or manipulative short selling.
The second approach (“circuit breaker”) would apply only to a particular security during severe market declines in that security.
The SEC believes that halting short selling following a significant decline in a security’s price would allow for sufficient time to re-establish equilibrium between buying and selling interests in an orderly fashion. It would also ensure the market participants had a reasonable opportunity to become aware of, and respond to, a significant decline in a security’s price.
SEC's Short Selling Rules Proposal
SEC's proposed amendments to Regulation SHO
http://edocket.access.gpo.gov/2009/pdf/E9-8730.pdf
thanks buyit
board marked
I agree
we all probably could apply that quote.
"If you don't know what the future holds and you can't accurately predict it, you don't want to be out there telling somebody something you don't have confidence in," says NIRI President and CEO Jeffrey Morgan.
seems profoundly reasonable to me...
New Federal Rule Could Help Retrieve Privileged Documents From SEC
Board IQ (04/14/09) Goodman, Julie
The new Rule 502A provides guidelines that could make it easier to retrieve privileged documents inadvertently handed over to the Securities and Exchange Commission (SEC). The federal rule addresses disclosures of privileged material made to federal agencies, stating that if the disclosure is inadvertent, then privilege is not waived. It also states that reasonable steps need to have been taken to prevent disclosure in order to qualify as “inadvertent.” The rule comes as the SEC is clamping down on incomplete or untimely document production, promising more enforcement action with failures to comply. John Walsh, associate director and chief counsel in the SEC's Office of Compliance Inspections and Examinations, said at the recent Investment Company Institute conference that the rule should help with the flow of documents to the SEC. He pointed out that in today's volatile economy, with ubiquitous mergers and acquisitions, firms may have inherited someone else's legacy system, or the person who generated all the privileged information may no longer be with the firm. While he said that the SEC is willing to work with firms that are being examined, they should nevertheless be aware they are making a privileged communication at the time they make it. “We expect that Rule 502(b) will facilitate the production of records in examinations because it will help both firms and examiners manage many of the privilege issues that can arise during the prompt production of records,” Walsh said later in a written statement.
Short ETFs Under Microscope as SEC Pounces
Reuters (04/14/09) Spicer, Jonathan
The dramatic increase of ETFs that profit from falling stocks has drawn the attention of the Securities and Exchange Commission (SEC), which has suggested that these leveraged inverse ETFs could be included in new rules aimed at curbing short-selling. Leveraged inverse ETFs are considered "synthetic" since they use a formula of options and other derivatives to yield two or even three times the profit when the underlying assets fall, allowing some trading firms to profit even during the market crash. ETFs were largely exempt from the SEC's original short sale rule, called the uptick rule, which was revoked in 2007. At that time, leveraged inverse ETFs were new, but they have since grown to account for nearly 3 percent of all U.S. ETF exposure, representing $12 billion.
Financial Crisis IR: Doing More With Less
IR Magazine (04/09) Stewart, Neil
A new survey from the National Investor Relations Institute (NIRI) finds that the economic downturn is cutting into investor relations (IR) spending. Among corporate NIRI members, 58 percent said they have cut their IR budgets, though only one in three of the largest companies said they have made cuts and another 20 percent said they have increased their IR budgets. But vendors are feeling the pain--half of IR counselors said their business has declined and 71 percent of small companies said their business is down by more than 25 percent. Still, 80 percent of corporate respondents said the time management spends on IR has increased or stayed the same, and 89 percent of IR officers said their contact with top management has likewise increased or remained steady. Smaller companies are the most affected because of their need to cut costs, says NIRI President and CEO Jeff Morgan, but he adds that cutting an IR budget is “shortsighted” because a company must "continually" stay connected to investors. "We continue to have to show the value of IR to companies that are smaller and newer,” he says.
MSRB Asks SEC to Approve EMMA Changes
Bond Buyer (04/15/09) Vol. 368, No. 33098, P. 1; Ackerman, Andrew
Municipal bond issuers may soon be able to voluntarily file non-required financial or operating information and event-based disclosures if the Securities and Exchange Commission approves a request from the Municipal Securities Rulemaking Board (MSRB). If approved, the filings could begin on July 1, when MSRB becomes the sole nationally recognized municipal securities information repository. Companies would be able to file information such as rating agency presentations, communications from the Internal Revenue Service, budgets, litigation actions, financing plans, and consultant reports, which MSRB general counsel Ernesto Lanza says will give investors a much more robust source of information. The list of new voluntary disclosures was culled from issuers’ investor relations Web sites, the Government Finance Officers Association’s recommended practices, and recommendations from the National Federation of Municipal Analysts.
Experts Sound Off on SEC's Potential Curbs on Short-Selling
Dallas Morning News (TX) (04/15/09) Hall, Cheryl
The Securities and Exchange Commission (SEC) recently announced proposals to rein in short-selling by reinstating the uptick rule or setting up a circuit-breaker rule that halts short-selling after a stock's price has dipped 10 percent, and a number of experts weigh in on the value of such actions. Rebecca Szelc of Deloitte Financial Advisory Services says that "shoddy underwriting and lax risk-management practices," and not short-selling, were responsible for the dive that financial stocks took, but she acknowledges that the reinstatement of the uptick rule might help buoy the average investor psychologically. The idea that the uptick requirement or any combination of the SEC's proposals can restore confidence among investors is echoed by Commerce Street Capital President Dory Wiley, while Belmont Global Advisors Chairman John Boone says that short-selling ought to be regulated to keep abuses to a minimum, "but without restrictions which inhibit desirable practices." Texas Christian University professor Daniel Short opines that the circuit-breaker rule might allow the market to partition price movement fueled by trading strategies from ones driven by changes in company fundamentals. John Standerfer of S3 Matching Technologies contends that the SEC is incorrect in its thinking that short-sellers and not fundamentals were the cause of financial stocks' decline. "If there really are situations where undue short-selling pressure drove stocks down intentionally and unjustly, then by all means the SEC should do something to combat it," he notes. "But if that were the case, why haven't they provided any examples of this, and why didn't they present a single proposal designed to combat that scenario?"
Swedish Director-Election Rules Could Cross Atlantic
MarketWatch (04/16/09) Orol, Ronald D.
The Securities and Exchange Commission (SEC) is planning to roll out an extensive regulatory agenda for investors in the coming months, including a proposal to permit investors to nominate director candidates onto corporate boards. "I looked carefully how access [to shareholders] is granted in Europe and, in particular, the Scandinavian markets because they have an interesting model," said SEC Chairwoman Mary Schapiro to reporters on April 6. "We'll have something that is different than what the agency has looked at specifically before." In Sweden and Norway, board nomination committees are almost completely composed of the largest investors or their nominees, and the board, which typically consists of between seven and nine members, is chosen by the three- to five-member nomination committee. The CEO is usually the sole management official on the board, but he or she cannot chair the board. In Sweden there is only one non-shareholder--a board representative--on the nomination committee, while in Norway there are usually two to three shareholder members on the committee. In the United States, about 50 percent of all corporations install the CEO as chairman, while in most instances management selects the whole board, including nomination, audit, and compensation committees. If the SEC mandates that shareholders make up nomination committees in the United States, then the role U.S. mutual funds play in board elections would be transformed. "It would be a transformation not just in the board room but also in the areas of securities analysis," says Corporate Library founder Nell Minow. "Proxy voting for direction elections is a compliance issue today but with this approach it would be an investment strategy for the fund." Minow says that mutual funds and other institutional investors would probably have to reorganize their investment teams to include managers that could find talented board candidates with specialized oversight expertise if a Scandinavian approach is adopted.
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SEC Grants No-Action Relief to Activist Shareholders
Harvard Law School (04/19/2009) Gallardo, Eduardo; Moloney, James J.; O'Grady, James B.
The Securities and Exchange Commission (SEC) has issued two no-action letters to Eastbourne Capital Management and funds affiliated with Carl Icahn clarifying that a dissident shareholder can obtain authority to vote for the nominees of another dissident shareholder in order to round out a "short slate" of director nominees for election at the same annual meeting. Eastbourne and the Icahn-affiliated funds have nominated five individuals to join the 12-member board of Amylin Pharmaceuticals. As a result of the SEC's reading of the proviso to the "bona fide nominee" rule in Exchange Act Rule 14a-4(d), some or all of their nominees can appear on each other's proxy cards. However, Eastbourne and the Icahn-affiliated funds must not have agreed to, and must have no intention of, forming a "group" as determined under Regulation 13D-G. Also, they cannot actively recommend the election of the other's nominees, and must direct their proxy solicitors not to do so as well. In the past, the proviso has been limited to allowing a soliciting shareholder to "round out" its short slate with nominees of the registrant.
Companies Increasingly Quiet About the Future
MSNBC (04/19/09)
Intel reported stronger-than-expected results for the first quarter April 14, but did not forecast revenue due to the uncertainty in the economy. Other companies have declined to provide a specific revenue forecast as well. According to The Hackett Group, companies are having problems estimating cash flow as a result of the credit crunch, which has made it more difficult to produce accurate quarterly estimates. The Hackett Group reports that more than 60 percent of companies say they cannot accurately forecast cash flow within 10 percent and that more than 90 percent say they cannot do so within 5 percent. Meanwhile, the National Investor Relations Institute (NIRI) says a third of 600 companies in a recent survey changed their policies on financial guidance, primarily by eliminating or limiting the guidance about earnings and revenue. "If you don't know what the future holds and you can't accurately predict it, you don't want to be out there telling somebody something you don't have confidence in," says NIRI President and CEO Jeffrey Morgan.
Professional Development
Upcoming Member Benefit Industry Roundtable Webinars
• On April 30, the BIO Pharma Industry Roundtable offers a member benefit webinar featuring Linda Horton, partner at Hogan & Hartson LLP, as she reviews the enforcement tools, penalties and key issues the FDA is working on for 2009
• On May 5, the Seminconductor / Solar Industry Roundtable has scheduled a member benefit webinar with a panel of analysts – “Tighten Up: A Year (or more) of Consolidation in Semi & Solar.”
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Accounting & Finance for IR – Self-Directed
This 3-part series has been archived and it’s not too late to register. Download a podcast, or view the webcast. Print the slides and resources to learn the basics of accounting at finance at your convenience.
IR weekly April 21, 2009
signs of a start to an economic recovery. Market activity followed those economic indicators as well, as President Obama continues to serve as head cheerleader and calls what he sees as “glimmers of hope” in our economy.
Over the last few weeks, much of the content of my weekly message to you has been narrowly focused on the activity at the SEC rather than broader financial regulatory reform. I’d like to give you an update on this. Congress’ upcoming five-week session prior to Memorial Day is a critical time on the legislative calendar as it presents an opportunity for committee work to come to the floor before recess. Will we see any financial reform legislation on the agenda? I am told maybe, but unlikely.
Financial regulatory reform is high on the agenda of both the Obama administration and Congress. From what I am hearing in D.C., the Senate and the House of Representatives are taking two different approaches and reaching a consensus is challenging. Some believe it is best to deal with systemic risk first and the creation of a super regulator. Others believe that it is better to have an overall regulatory framework in place and then deal with details. Regardless, I am hearing that it may be after Memorial Day before we begin to see proposals move forward for a vote. I sense some frustration by the Obama administration with the legislative process, and in a rare move, Senator Chris Dodd and Congressman Barney Frank issued a joint letter (pdf) to President Obama promising action this year. So you may say, “As an IR professional, why does this matter to me?”
The evolution of financial reform does matter to IR, and it is something that NIRI will continue to help decipher for you as it progresses. This past week I spent time at the NYSE and in a meeting with NYS E Euronext CEO Duncan Neiderauer and heard the same message of the importance of financial reform for issuers. For example, one of the sticking points for discussion will likely be which type of regulation works best – “rules based regulation” or “principles based regulation?” The decision may have a dramatic impact on, for example, the fate of IFRS and GAAP accounting. GAAP is rules based and IFRS is principles based. No one can accurately predict the outcomes of financial reform, but the result will likely mean IR must continue to evolve in concert with the broader regulatory reform. So I believe it is important for all of us to stay abreast of the changing regulation and begin to prepare now.
Finally, you should know that last week the NYSE filed a proposal with the SEC to change section 202.06 of its manual to allow companies to comply with its immediate release policy by disseminating information by any Reg FD compliant method. NYSE-listed companies should read the proposal (pdf) which provides important background, rationale and additional detail.
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This board was created for discussing educational material as it applies to Investor Relations.
Investor Relations (IR) is a strategic management responsibility that integrates finance, communication, marketing and securities law compliance to enable the most effective two-way communication between a company, the financial community, and other constituencies, which ultimately contributes to a company's securities achieving fair valuation. (Adopted by the NIRI Board of Directors, March 2003.) The term describes the department of a company devoted to handling inquiries from shareholders and investors, as well as others who might be interested in a company's stock or financial stability.
Typically investor relations is a department or person reporting to the Chief Financial Officer or Treasurer. In some companies, investor relations is managed by the public relations or corporate communications departments, and can also be referred to as "financial public relations" or "financial communications". Investor relations is considered a specialty of public relations by the U.S. Department of Labor. [1]
Many larger publicly-traded companies now have dedicated IR officers (IROs), who oversee most aspects of shareholder meetings, press conferences, private meetings with investors, (known as "one-on-one" briefings), investor relations sections of company websites, and company annual reports. The investor relations function also often includes the transmission of information relating to intangible values such as the company's policy on corporate governance or corporate social responsibility. Recently, the field has trended toward an increasingly popular movement for "interactive data", and the management of company filings through streaming-data solutions such as XBRL or other forms of electronic disclosure have become prevalent topics of discussion amongst leading IROs worldwide.
The investor relations function must be aware of current and upcoming issues that an organization or issuer may face, particularly those that relate to fiduciary duty and organizational impact. In particular, it must be able to assess the various patterns of stock-trading that a public company may experience, often as the result of a public disclosure (or any research reports issued by financial analysts). The investor relations department must also work closely with the Corporate Secretary on legal and regulatory matters that affect shareholders.
While most IROs would report to the Chief Financial Officer, they will usually also have access to the Chief Executive Officer and Chairman or President of the corporation. This means that as well as being able to understand and communicate the company's financial strategy, they are also able to communicate the broader strategic direction of the corporation and ensure that the image of the corporation is maintained in a cohesive fashion.
Due to the potential impact of legal liability claims awarded by courts, and the consequential impact on the company's share price, IR often has a role in crisis management of, for example, corporate downsizing, changes in management or internal structure, product liability issues and industrial disasters.
In a difficult time such as the bear market of 2008-09, IROs will want to stay visible and build relationships, be factual in tone and not too quick to make promises, focus on the long-term story and balance sheet strength (as opposed to short-term earnings growth), aggressively refute rumors and answer concerns of investors, and coordinate media relations and investor communications. Finally, IROs should remember: “The story is the business, not the stock price.” [2]
The most highly-regarded professional member organization for Investor Relations in the United States is the National Investor Relations Institute, or NIRI. In the United Kingdom, the recognized industry body is The Investor Relations Society, while in Canada, the professional association is called the Canadian Investor Relations Institute, or CIRI. Australia's professional organization is known as the Australian Investor Relations Association (AIRA).
IR Research Sites:
Government Agencies & Information:
FINRA eLearning Courses: E-Learning Courses: More in-depth online training featuring assessment tests, scenarios, real-time completion tracking and certificates of completion (see www.finra.org/elearning).
1/1/09 Unregistered Resales of Restricted Securities: http://finra.complinet.com/net_file_store/new_rulebooks/f/i/finra_09-05.pdf
OTC Market TIERS:http://www.pinksheets.com/pink/otcguide/investors_market_tiers.jsp
OTC Symbol Directory - Equity Deletions:ftp://ftp.otcbb.com/symboldirectory/OTC%20Equities%20Deletions%2005292009.txt
Defintions: http://investorshub.advfn.com/boards/read_msg.aspx?message_id=38895772
Educational Sites:
Online Certificate Program in Investor Relations
Fee: | $860.00; $660 for NIRI members; discount code: NIRI |
Offered in partnership with University of California, Irvine
Experience the convenience and flexibility of online learning through this outstanding professional development program. Develop your competencies as an IR professional and earn a University certificate from the West Coast's premier university. The seven-course certificate program can be completed entirely online. To download a program brochure click here. Or for more information, go to the UCI site at: http://unex.uci.edu/certificates/business_mgmt/finance/ir/.
Required Courses | |||||||||||
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Course # | Title | ||||||||||
MGMT X441.1 | Introduction to Investor Relations ( 1.5 units ) Show Details . | ||||||||||
MGMT X441.2 | The Capital Markets ( 3 units ) Show Details | ||||||||||
MGMT X441.3 | The Investment Process ( 3 units ) Show Details | ||||||||||
MGMT X441.4 | The Corporate Environment ( 3 units ) Show Details | ||||||||||
MGMT X441.5 | Communications for the Investor Relations Professional ( 3 units ) Show Details | ||||||||||
MGMT X441.6 | The Practice of Investor Relations ( 3 units ) Show Details | ||||||||||
Elective Courses | |||||||||||
Course # | Title | ||||||||||
MGMT X433.22 | Decision Modeling for Asset Allocation: The Markowitz Model ( 1.5 units ) Show Details | ||||||||||
MGMT X461.17 | Electronic Marketing ( 3 units ) Show Details | ||||||||||
MGMT X441.14 | Regulations 101 ( 1 units ) Show Details | ||||||||||
ENGLISH X446.4 | Business Writing ( 4 units ) Show Details | ||||||||||
MGMT X433.10 | Advanced Stock Investment ( 2 units ) Show Details | ||||||||||
MGMT X429.12 | International Accounting Standards ( 3 units ) Show Details | ||||||||||
MGMT X419.2 | Pre-MBA Accounting ( 3 units ) Show Details |
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