Newspapers as a dissemination point for TOD

A major change is quietly underway in the Transparency Obligations Directive. This change will require listed companies to ensure that their news reaches certain specific destinations such as financial news services, web sites serving individual investors and “newspapers”.

TOD has come a long way since the Commission’s original ideas back in 2002. They proposed that posting sensitive news to an issuer’s website would be enough to ensure that all investors received it at the same time. However, TOD (as passed by the European Parliament) now requires companies to have a much wider distribution than just their own website.

The detailed rules being devised by CESR are likely to have a major effect on how far companies have to send their price sensitive (inside) news.

A major discussion point has been the role of newspapers in reaching individual investors. It is self evident that newspapers are a key source of information for investors. Survey after survey shows the crucial role they play. However what’s the best role for them in financial disclosure?

In the past, in many countries an advertisement in a national newspaper has been mandatory. And the newspaper lobby has been keen to ensure that this role is maintained. They argue that newspapers are key to making sure that retail investors are actively informed.

However the question remains whether a paid advertisement is the only way to ensure that the newspapers receive news.

For many years, the newspapers have subscribed to a national wire service, such as the Press Association in the UK, Belga in Belgium, ANP in Holland and so forth. The wire service typically contains 2 sets of news – general news written by journalists employed by the wire service, and ‘commercial’ news sent by companies seeking the attention of the journalists.

The wire service is delivered to a computer screen used by the journalists, ensuring that they can use the story to create the newspaper. Obviously, there is a distinction between the different types of market news put out companies. A small announcement of a director’s dealing will have less impact than its financial results. They key is to ensure that journalists – especially at the major financial newspapers across Europe – have fast access to these announcements so that they can make a judgement about which news will be of interest to their readers.

This is a very different process from requiring the purchase of an advertisement. It also ensures that news is sent in a ‘fast and secure’ manner as required by TOD.

So watch out for the requirement to include newspapers in your mandatory news dissemination.