Reg FD

Every few weeks, our CEO, Jonathan Schwartz, talks to me excitedly about a blog he wants to post to provide his insights on our financial results or significant new customer relationships or product releases. He believes (as do I) that his blog, along with other channels of communication, is an important source of information for our employees and investors and entirely consistent with the intent of Reg FD. Unfortunately, to date there hasn’t been any specific regulatory guidance from the U.S. Securities and Exchange Commission as to how a company can use the Internet alone (via webcasts, blogs or website postings) and conform with Reg FD. As a result, Jonathan and I have some interesting discussions and he gets some advice that I’m sure he feels is, at times, overly conservative.

A constant focus for us is how to drive greater openness and transparency in our business. It’s part of our corporate DNA. Witness the fact that over 4,000 Sun employees have blogs, including Jonathan. It’s also a part of our approach to technology – whether open standards for document or identity interchange or open source software and hardware.

At the core of all this is the Internet. Today, there is simply is no more effective medium for the timely dissemination of information to the widest possible audience. And, we are only in the early stages of its growth. It is an unparalleled way for companies to have direct and immediate communications with employees, customers, suppliers and, especially, shareholders.

We are excited by the SEC’s desire to support investors by harnessing the power of the Internet. The Commission has been active in promoting the use of interactive data systems (including XBRL) to provide valuable tools for investors. The Commission has also proposed the use of the Internet as a ubiquitous communication vehicle for the electronic distribution of proxy materials on a “notice and access” basis. These actions are consistent with the Commission’s belief in the utility of the Internet to drive corporate transparency and the flow of information to investors.

But throughout history, the pace of technological adoption has always surpassed the speed of adaptation of the law to these changes. By their nature, legislation, regulation and judicial decisions always play “catch up”. To some degree this is the case today with regard to Reg FD. As enacted in 2000, Reg FD was intended to put all investors on an equal footing when it comes to receiving material information about a company. In order to meet its requirements, companies must provide material information on the basis of widespread dissemination 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.” But, as I mentioned, we don’t yet have clear guidance on how we can use the Internet to satisfy this requirement.

With this in mind, Jonathan and I recently sent to SEC Chairman Christopher Cox a letter sharing our views on the value the Internet in support of Reg FD. While the Commission is embracing the Internet’s advantages in other areas, we think that the time is right for it to also take another look at Reg FD.