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Kardis on Antitfraud, the Internet and the Blogosphere


In 2000, the Securities and Exchange Commission (the Commission) issued systematic guidance on the electronic delivery of disclosure documents and company liability for their Web sites content. Since the 2000 Electronic Release, company Web sites have progressed to include blogs, shareholder forums and a variety of other information of interest to investors -- information produced both by the company and third-parties. The August 2008 release of Commission Guidance on the Use of Company Web Sites revisited issues with respect to the application of the antifraud provisions of the Federal securities laws to company Web sites. In this Commentary, Phillip J. Kardis II discusses company Web sites and examines the Commission’s guidance on using the Internet as an information delivery tool. He writes:
 
     Company Web sites often contain hyperlinks to third party Web sites. The Commission addressed the concern in the 2000 Electronic Release that a company may be liable for information on a third party Web site if the company provided a hyperlink to such Web site. The touchstone of the analysis for the Commission was whether the company had "adopted" the information on the third party Web site. In the 2000 Electronic Release, the Commission provided a nonexclusive list of factors that may be important in determining whether a hyperlink results in the company adopting third party information:
 
·       Context: does the company make any statements about the hyperlink or does the location of the hyperlink imply that the company is adopting the information?

·       Confusion: is it possible that an investor will be confused as to whether the information is the company’s or a third party’s?

·       Presentation: how is the hyperlinked information presented on the screen? Is it pulled onto the company’s Web site? Is it clear that the investor is leaving the company’s Web site?
 
     . . . .
 
     For purposes of the antifraud provisions of the federal securities laws, the Commission notes that, generally speaking, simply because an investor can access previously posted information on a company’s Web site does not, without more, mean that such information has been republished, or the company has made a new statement, or that the company is required to update the information. Liability attaches to previously posted information if the company affirmatively restates or reissues a statement. Where it is unclear to a reasonable person that the information does not speak as of an earlier period, the Web site should clearly identify the information as historical (e.g., such as providing a date for the information) and the information should be located in a separate section of the Web site that contains only previously posted information.
 
     . . . .
 
     Posting information on your Web site may implicate Exchange Act requirements relating to the certification of disclosure controls and procedures. If you use your Web site to meet the disclosure obligations under Exchange Act requirements, the disclosure controls and procedures would apply to such information because it is information required to be disclosed by the company in Exchange Act reports. Failure to post such disclosures on the company’s Web site could mean that the Exchange Act report is incomplete. Other information posted on the company’s Web site, however, is not subject to the disclosure controls and procedures of the Exchange Act.
 
(footnotes omitted)