June 29, 2011
In its letter of June 27, 2011, the NYSE states: NYSE provides the third-party products and services to listed companies through non-exclusive arrangements with vendors. The Exchange is willing to consider entering into such arrangements with other third-party vendors that provide high-quality products and services. However, simply offering a subsidy or credit to listed companies would not be consistent with the Exchanges objective of assuring that it provides high quality products and services to its listed companies.
Two executives of smaller investor relations service providers have publicly disputed the NYSE's willingness to entertain agreements with other providers.
Commenting on an article in which the NYSE claims it is open to contracting with other service providers, Patricia Baronowski, CEO of Pristine Advisers, writes: "Yes, but who does one contact to become a partner? We've written countless emails to inquire this question - of which, not a single reply has been given. Saying it and following through with it are two different things. If they are receptive to having people bid to become partners -- then they need to provide a means of actually allowing that to happen -- who to contact? contact details? etc. etc." See: http://insideinvestorrelations.com/articles/18286/nyse-responds-uproar-over-free-ir-services/
Commenting on the same article in the Investor Relations Executives Group on LinkedIn, Walt Schuplak, Managing Partner of Market Intelligence Group LLC states: "(They NYSEs) claim to being open to all providers is false. My firm approached the NYSE when this came to light and we were told that it's Thomson or Ipreo. There was no RFP involved or interviews with providers. The two firms that provided them data were chosen and everyone else was out in the cold." http://www.linkedin.com/groups?about=gid=104689trk=anet_ug_grppro
My own research has failed to find any information provided by NYSE outlining the process that vendors must follow to have their services added or reviewed.
The NYSE's contention that its current vendors provide high quality products is questionable. As outlined in my earlier comment and explained in greater detail below, the Thomson Reuters website hosting and PR wire services that NYSE offers to issuers are not of a high quality.
The NYSE's claim that it does not endorse any particular vendors or products also is questionable. The NYSE says it is willing to subsidize only high quality providers, but at the same time it claims that its decision to contract with specific vendors does not involve any form of recognition or endorsement. The NYSE is at minimum vouching for the quality of the products its partner vendors provide, which amounts to an endorsement by the exchange. By now asking to include the services in the text of its rulebook for issuers, the reasonable inference will be that these ostensibly high quality services also satisfy the NYSE's listing requirements.
The NYSE says there is no conflict between the services it offers and its regulatory role since it does not require the use of any particular vendor or vendors or any particular products or services for compliance with its listing requirements. However, the fact is that Thomson Reuters provides services that enable issuers to comply with disclosure regulations, including the NYSE's corporate governance and timely news dissemination requirements, and these are the only such services included in NYSE's offerings to issuers. Given the endorsement by the NYSE of these services and the fact that they will be listed in the Company Handbook, an objective observer would reasonably conclude that 1) the services of the NYSE's vendor partners enable issuers to comply with the exchange's listing requirements and 2) that the NYSE's vendor partners provide superior products to those of vendors that are not partners.
It is also important to consider the conflict or lack of incentive to innovate that arises between the NYSE's dual role as regulator and as a provider of investor relations services. For instance, Section 202.06 of the Listed Company Manual covering the Procedure for Public Release of Information seems antiquated in light of issuers' prevailing practices and technologies. In part, the section states:
"News which ought to be the subject of immediate publicity must be released by the fastest available means. The fastest available means may vary in individual cases and according to the time of day. Ordinarily, this requires a release to the public press by telephone, facsimile, or hand delivery, or some combination of such methods. Transmittal of such a release to the press solely by mail is not considered satisfactory. Similarly, release of such news exclusively to local press would not be sufficient for adequate and prompt disclosure to the investing public.
"To insure adequate coverage, where a listed company is satisfying the Exchange's immediate release policy by issuing a press release, that press release should be given to Dow Jones Company, Inc., Reuters Economic Services and Bloomberg Business News.
"Companies are also encouraged to promptly distribute their releases to Associated Press and United Press International as well as to newspapers in New York City and in cities where the company is headquartered or has plants or other major facilities."
It's noteworthy that this section makes no mention of email or web technologies, including EDGAR, even though these are the primary ways that investors and the financial news media receive issuers' news today, and are faster to boot.
Using these outdated NYSE requirements, Thomson Reuters last year introduced its Europe-based Hugin PR wire service to North America under the somewhat misleading moniker of web disclosure. According to the NYSE's website, this service meets the exchange's dissemination requirements.
To quote:
"NYSE Euronext has partnered with Thomson Reuters to offer the Thomson Reuters Web-based Disclosure solution to our listed companies. The solution includes a secure and intuitive self-publishing tool accessible at no extra cost, giving you full control of your message creation and distribution process, while saving you third party formatting and distribution charges. Using this tool, your regulatory releases will reach all outlets critical to compliance such as Reuters, Dow Jones, Bloomberg and AP newswires, as well as major financial and media sites, Thomson Reuters First Call, and key TV and print outlets." See: http://www.nyse.com/about/listed/1224887730278.html
However, at the time the above statement was published, the Thomson Reuters service lacked distribution to Yahoo Finance, which is by far the most popular website for investors in the US. Even today, the NYSE Euronext supported Thomson Reuters service lacks distribution to prominent finance websites such as AOL's Daily Finance, MSN Money, CNN Money, Morningstar, CNBC.com and Seeking Alpha. All of Thomson Reuters' competitors offering a similar distribution service provide distribution to these websites and many others.
Yet the NYSE has partnered only with Thomson Reuters and would have the Commission and the market believe that the services it has chosen are of a high quality (yet not endorsed by the exchange for compliance). Sorry, but they shouldn't be endorsing any product designed to meet regulatory requirements, especially not one that is of the lowest quality in the marketplace.
Based on the NYSE's poor track record, I believe issuers themselves are best placed to determine which services they need to further their investor relations objectives. A suitably designed voucher system would enable issuers to choose the services best suited to the issuer and its shareholders' particular needs, improve competition and innovation in an industry that needs it, lessen the implied endorsement or approval the NYSE wishes to avoid, and communicate to the NYSE's listed companies that the exchange trusts issuers to make appropriate judgments about the quality and relevance of the services they choose to apply a credit to.
Thank you again for the opportunity to comment on this proposed rule.