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A New SEC Rule Proposal

Brian Schaffer  Follow

I know we all have regulatory fatigue and the last thing we want is another rule. However, this is one we can all agree on. And by “we” I mean IR practitioners and Wall Street. My proposed rule seeks to officially end the practice of companies attempting to bury bad news late on a Friday, or worse, over the weekend. This tactic never works and never has. Companies that use this tactic only succeed in unnecessarily angering their core constituents. If the news is material enough that it warrants an 8-K, and you have flexibility as to when to make the filing, don’t get cute and do it after market on a Friday.

In today’s marketplace this practice is baffling, especially considering that almost all public companies provide instant email notifications of when SEC filings are made. It’s comparable to a burglar calling the police to tell them he is robbing a house at 4:00 a.m. Why do companies continue to think they can outsmart Wall Street by employing such tactics?

My rule would be called “No Friday After-Market 8-Ks” and would have only a few caveats:

  1. Want to issue an 8-K on a Friday? Do it pre-market.
  2. Have a material issue develop during trading hours on a Friday that can be held over the weekend until pre-market on Monday?  Wait until Monday.
  3. Think you are going to slip something by someone on a weekend?  Blackberries and iPhones have eliminated that possibility.
  4. Have no other choice but to issue an 8-K after market on a Friday? Consider issuing a corresponding press release and making follow-up calls to your top institutional shareholders and sell-side analysts alerting them to the news and the reason for disclosing it now.

In the absence of my proposed SEC rule, unless you have no legal recourse, let’s all just try to proactively end this silly practice and just wait until Monday. CJP

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