This post contains forward-looking statements.  Today’s financial news distribution systems might not be ready for these changes…but, in my opinion, they should be.

I believe in the value of the newswires.  Verifying, editing, and disseminating information around the globe is not an easy task.  They perform an important function and I hope to see them adapt and continue to thrive in our digital world.  However, I have concerns over some of the recent responses to the SEC’s guidance which allows companies to use websites and blogs to meet public disclosure requirements.

The SEC did not lay down a set of specific rules and it is left up to each company to determine if a website or blog meets disclosure requirements.  Many best-practices are still open for debate, and the current discussion revolves around how companies should handle the display of financial tables.  Is it necessary to include financial tables in the body of a distributed release, or is it sufficient to simply provide a link to the financial details? 

Some newswires have been outspoken in recommending to clients that financial tables are necessary.  There are several arguments used to support this view:

• It is more convenient for analysts and investors.
• Corporate websites may not be prepared for the increase in web traffic.
• Downstream systems have been designed to expect these tables.
• Publishing the numbers over the wire provides a public timestamp, making it more difficult to change data once the release has been issued.

I see the logic in some of these arguments, but companies should keep in mind that the additional data that is included in a release will cause the cost to rise.  In the absence of clear requirements, it is ultimately the company’s decision whether the cost is worthwhile.

The public debate continues and there are quite a few posts that address the topic.  Dominic Jones published a critical piece here called, "Business Wire’s Double Standards."  Jones is a firm believer in the notice-and-access approach where a company issues a notice through the wire services, but only provides the financial details on the company’s website.  Business Wire has the following to say on the subject, "Earnings Tables Needed in Releases Say Market Participants."

I’ve read posts from both sides of the discussion.  While I am not an expert in disclosure, I do have an extensive background in data processing.  My understanding of the disclosure requirements have led me to conclude that it is unnecessary to provide financial tables in a press release.  Might that inclusion be a convenience?  Absolutely, but there are just as many, if not more reasons to follow the notice-and-access model.

Redundant Data is a No-No

If you’ve ever played a game of telephone, you know how easy it is for information to become altered as it’s passed along a chain of interpreters.  Although it’s possible to maintain the integrity of data that is copied from site to site, it’s far better to take advantage of the web and link directly to the source.  After all, the power of the Internet includes our ability to share data through hyperlinks.  Issue a release, include a link to the financial tables in the release, and both humans and systems will have full access to the data on a company’s website.

HTML Parsing is so Early ’90s

If a financial system is reading data directly from the release (sometimes known as screen-scraping), then it’s already committing a major blunder.  Today’s systems should be designed to read XBRL (XML) data files.  These files should be accessible through a link in the release that points to the company’s website.  Why should other companies shoulder the burden of antiquated financial news distribution processes?

Fire That Analyst

What are you thinking if you’re making investment decisions based on a news release?  Good decisions are based on having all of the available information.  It’s not practical to include all of the details in a press release, so a good analyst will read the information that the company provides on its website.  The press release is a great way to notify everyone that the numbers have been published, but it shouldn’t be a decision-making tool.

Behold the Power of the Internet

If a downstream site feels that it absolutely must include the financial tables with the release, it’s quite simple to pull the data from the source.  Technically speaking, why not just display the financial tables in a frame or read the XBRL file and convert it to an HTML table on the site?  What have we learned with Web 2.0?  Don’t copy data, create mashups.

You Can’t Stop Progress

After this post, I hope I’m still a friend to the newswire services.  At the same time, it’s important to be honest and up front about a requirement versus an opinion.  Some newswires may continue to counsel their clients that financial tables are a necessity, but I simply don’t think that’s the case.  Adapt to the digital world and link to the source of the data on a company website.  Focus on what can be done better with current tools rather than halting progress for outdated systems.