I’ve been an officer of a public company for a while, and I’ve had access to confidential information for a good while longer. And I’m used to holding my tongue on issues that’d be deemed material to Sun’s financial performance. Like a pending acquisition or big sale, or data related to how our quarter’s going. In a public company, there are very strict laws surrounding how information’s disclosed.
So a couple years ago, when I first started blogging, I and our illustrious general counsel were far less worried about what I was saying, than where I was saying it. For example, I couldn’t use my blog to announce our quarterly performance, or disclose a material transaction. I had to use a press release, or a conference call (with a telephone operator, no less!).
A regulation known as “Reg FD,” or Regulation Fair Disclosure – which attempts to ensure no one audience gets preferential access to material non-public information. It’s a great concept, designed to prevent selective disclosure, or actions that might advantage one investor over another.
Unfortunately, Reg FD doesn’t recognize the internet, or a blog, as the exclusive vehicle through which the public can be fairly informed. In order to be deemed compliant, if we have material news to disclose, we have to hold an anachronistic telephonic conference call, or issue an equivalently anachronistic press release, so that the (not so anachronistic) Wall Street Journal can disseminate the news. I would argue that none of those routes are as accessible to the general public as a this blog, or Sun’s web site. Our blogs don’t require a subscription, or even registration, and are available to anyone, across the globe, with an internet connection. Simultaneously.
Now we happen to have a like-minded Chairman at the United States Securities and Exchange Commission (the ‘SEC’), Christopher Cox. So Mike and I sent along a rather formal note last week, requesting a clarification to Reg FD, one that would permit our (and everyone else) using the internet (eg, a company blog or web site) to release material information. Without a press release or operator assisted conference call. We are, after all, the primary source of such material information – there’s no point in going through an intermediary if what we’re after is fair disclosure and full transparency. Let the light shine in, don’t buy a flashlight.
We’ve had enough interaction with the Chairman (and read enough of his writings) to know he understands the utility of the internet to inform investors – but until we see a formal revision or clarification to FD, we’ll still be limiting what we disclose via blogs and the internet. And consuming trees with press releases. Which can’t, in the long run, be all that desirable.
But we’ll take it one step at a time…
I’ve attached the letter below (and yes, before you ask, we did fax it, and send by overnight mail).
Via Fax and Federal Express
September 25, 2006
The Honorable Christopher Cox
United States Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549
Dear Chairman Cox:
You have been a leader in the drive toward bringing greater transparency
and access to information for individual investors. Indeed, you recently
challenged us to the capitalize on the full potential of the Internet
for the benefit of the American investor: “So the question for us today
is how do we put the current communications technology to the service of
the American investor. How do we harness the Internet which is serving
so many customers in so many other ways to deliver the maximum benefit
to those in our regulated capital markets.” (Chairman Cox Remarks to
Interactive Data Roundtable, June, 12, 2006).
Sun Microsystems fully supports and applauds your recognition that the
Internet is a “great instrument of national and international
communication… [and] also a critical engine of American productivity.”
(Id.) We have been on the same side of the issue from a technology
perspective – from the evolution of open standards for document
interchange (such as the Open Document Format), identity interchange
(Project Liberty) to the drive toward open source (OpenSolaris and
OpenOffice). Our view is that now is the time to fully exploit the
innovation that only the Internet can yield in creating the most
transparent environment possible for keeping all investors promptly and
As adopted, Regulation Fair Disclosure’s requirement of widespread
dissemination can be met through the filing of a Form 8-K or “through
another method (or combination of methods) of disclosure that is
reasonably designed to provide broad, non-exclusionary distribution of
the information to the public.” (17 C.F.R Sec. 243.101(e)(2)) To date,
the SEC has not taken the position that the Regulation’s “widespread
dissemination” requirement can be satisfied through disclosure through
the web-postings alone. While that may have been a pragmatic approach in
2000, we believe that the proliferation of the Internet supports a new
policy that online communications fully satisfy Regulation FD’s broad
Our corporate website (www.sun.com) currently receives on average of
nearly a million hits per day. This website includes a blog that I write
as CEO of Sun Microsystems (www.blogs.sun.com/jonathan), as well as the
blogs of over 4,000 of our other employees. My blog is syndicated across
the Internet by use of RSS technology; thus, its content is “pushed” to
subscribers. This website is a tremendous vehicle for the broad delivery
of timely and robust information about our company. It is our view that
proprietary news outlets are insufficiently accessible to the broad
majority of Internet users and individual shareholders. It is certainly
the case that the Internet represents a broader user base than those
able to afford subscriptions to traditional forms of media and thus
usage of this or any other freely available company blog or web site
should be considered sufficient in satisfying the objectives of
Regulation Fair Disclosure.
In 2001, upon the one year anniversary of the effective date of
Regulation FD, Commissioner Unger requested a study designed to assess
the implementation of the regulation. (“Special Study, Regulation Fair
Disclosure Revisited,” U.S. Securities and Exchange Commission, December
2001, modified November 29, 2003.) Even then, the roundtable group
recommended that “the Commission should embrace technology to expand
opportunities for issuers to disseminate information online. The
Commission should make clear that options such as adequately noticed
website postings, fully accessible webcasts and electronic mail alerts
would satisfy Regulation FD.” (Id.) The evolution of the Internet makes
these recommendations even more compelling today.
We truly believe in the utility of the Internet – as a means of driving
transparency throughout all governmental and corporate processes, as
well as greater accessibility of health care, education and social
services. Indeed, it is a principle on which Sun Microsystems was
founded. We encourage you to look to the Internet to achieve the
Commission’s objectives of greater investor access to information and
would welcome the opportunity to further discuss with you our views in
Chief Executive Officer
Sun Microystems, Inc.
cc. Michael Dillon, General Counsel, Sun Microsystems, Inc