Employee Training: From Reg FD to “Wall Street 101”

By Maureen Wolff, President and Partner, Sharon Merrill Associates

Wall Street 101When the SEC last month charged First Solar’s former head of investor relations with violating its fair disclosure rules, the announcement gave more than a few IROs pause. And for good reason. Lawrence Polizzotto paid a $50,000 fine for the violation. Although corporate IROs and the financial press have focused on the settlement with Polizzotto, perhaps more critical for public companies is the SEC’s treatment of First Solar itself.

Rather than charge the company separately, the SEC said it decided to forego corporate enforcement because of First Solar’s “extraordinary cooperation.” This included the company self-reporting the violations to the SEC and its “environment of compliance,” which First Solar developed through its disclosure committee and additional Reg FD training for employees managing the company’s public disclosure.

But how many public companies are actively training their staff in Reg FD, insider trading or even the general responsibilities that come with working for a public company?  For example, while instruction against insider trading is something every public company should be providing, there are numerous examples of public filers whose employees claimed they did not know they were violating insider trading laws.  Many companies expect their managers and reporting staff to understand what it means to be a public company employee, but may not take the time to teach it. And if it is taught, the training may consist of just a single session right before the IPO – perhaps never to be offered again.

If your employees have not been trained recently in all of the rules and inherent responsibilities that come with being publicly traded, consider sessions that cover these three areas:

1)      Regulation Fair Disclosure – Training in Reg FD was key to First Solar’s favorable settlement. The SEC recognized that the company had made a good faith effort to train management and employees in Reg FD, and in the handling and distribution of material, non-public information. Corporate Reg FD training typically includes teaching employees, management and board members the meaning of materiality and the methods the SEC considers compliant to disclose material information.

2)      Life as a Public Company – Those of us who have worked in and around public companies for a long time may take this concept for granted. But many employees, particularly younger talent and those at pre-IPO employers, need an introduction to what it means to work at a public company. These introductions typically cover topics such as investor relations, corporate reporting, new compliance and disclosure responsibilities and procedures. They also typically address the role of social media at a public company, including the appropriate employee use of sites such as Twitter, Facebook and Instagram, among others.

Employees, especially those at IPOs, also should understand why their company’s corporate culture and communications policies have to change after an IPO. For example, companies that are very transparent with their entire staff about sales projections (and even post these goals in public office locations) usually have to scale back that type of communication once they go public. 

3)      Wall Street 101 – Knowing proper communications channels and responsibilities is one thing, but understanding how the equity markets work is quite another. “Wall Street 101” training introduces employees to financial market concepts such as stock market mechanics, roles of the buy side and sell side, and interpreting analyst research, along with basic terms such as OTC, IPO and others. The purpose is to educate employees who work at a public company but may have little familiarity with how the company’s stock trades and the key players involved.

Hopefully, your public company doesn’t have a Reg FD issue like First Solar, or a potential insider trading violation. But by preparing employees well ahead of an issue, you can significantly reduce risk for them and for the enterprise.

Maureen Wolff is president and partner at Sharon Merrill, an investor relations strategic advisory firm that includes among its services Regulation FD, disclosure and Wall Street 101 training for employees, management and boards of directors.  Maureen leads the implementation of the firm’s strategic vision and provides high-level strategic counsel to clients. She is a past chairman and board member of the National Investor Relations Institute (NIRI) and a current member of NIRI’s Senior IR Roundtable. She is a trusted advisor to CEOs, CFOs and boards of directors on critical communications issues including corporate governance, shareholder activism and proxy contests, CEO succession planning and disclosure issues.

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