Updating Website and Consistency With Disclosure

Many companies now use their websites to communicate general business, marketing and financial information to customers, the general public and potential investors. A com- pany might also use its website to supply information from third parties, either by publish- ing the information on its website or by hyperlinking to the third party’s site. Because all online disclosures must comply with federal and state securities laws, they pose legal risks for the company. The SEC has made it clear that information available on a corporate website constitutes a “written communication” subject to the SEC’s antifraud rules.

Trap for the Unwary

“Keep it Clean”: Scrubbing the Website to Avoid Gun-Jumping

Although a company may think it acceptable to promote itself and laud corporate developments on its website, the SEC may view website content as an “offer,” a “general solicitation” or even as a “nonconforming prospectus.” As a result, a company planning for an IPO should take precautions regarding its online disclosure:

•Carefully review the company website and any information on third-party web- sites to which it hyperlinks.

•Work with counsel to understand the SEC’s strict rules regarding what kind of information may be disseminated when and to whom, which depend in part on the nature of the content and the timing of its availability before, during and after the registration process.

•“Scrub” the website before an offering to possibly remove company or product hype, links to third-party sites and other nonverifiable information.

•Avoid establishing a new website, or launching a new image campaign, immedi- ately before or during the registration period. The SEC may view such efforts as an attempt to condition the public to be receptive to the IPO and therefore as an illegal “offer” before or during the IPO.

•Use the website in a manner consistent with the company’s past practice, forordinary-course corporate communications (including press releases).

•Do not mention website addresses in the prospectus other than as a statement of fact.

•Limit references, if any, to an offering according to the “tombstone” and related rules of the SEC.


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