Business Laws and Regulations

Anti-Trust

Sherman/Clayton Act and Robinson Putnam Act make engaging in activity that ruins competition illegal. Overselling wording in news releases announcing acquisitions and divestitures can be cited as violations.

Regulation Fair Disclosure, Regulation FD or Reg FD

Adopted in August 2000, Regulation Fair Disclosure requires all publicly traded companies to disclose material information to all investors at the same time. Material information is any news that could influence a reasonable investor's decision to buy or sell stock. Consequently, a company can't share material news with just a limited audience (such as selected reporters); rather, the company must disclose that information in ways that ensure everyone has equal access at the same time. For more information about Regulation Fair Disclosure, go to www.sec.gov/answers/regfd.htm.

SEC Form 10K

Commonly called the "annual report," Form 10-K offers a detailed picture of a company's operations, the risks the organization faces and financial results for the fiscal year. The report includes analysis by company management of the business results and what is driving them.

Political Contributions

Federal Corrupt Practices Act of 1925, Hatch Act of 1939 and the Taft-Hartley Act of 1947 govern labor relations management. These laws prevent organizations, including unions, from contributing to any political campaign or candidate and prohibit any candidate from accepting such contributions. Organizations and unions have formed political action committees (PACs)to get around these prohibitions. PACs are legal because employees or union members, not the organization itself, fund them. However, the 2010 Citizens United U.S. Supreme Court decision has changed the rules by which corporations, unions and other organizations can contribute to political causes.

Lobbying

Federal Lobbying Act (1913) requires lobbyists to register with the clerk of the U.S. House of Representatives or the secretary of the Senate between the first and tenth day of each quarter. A lobbyist must report the amount of money he or she received during the previous quarter for lobbying activities. The lobbyist must name publications in which he or she has had an article or editorial published on behalf of the person or organization for which he or she is lobbying. This requirement does not apply to newspapers in the regular course of business. Cases indicate that this act applies only if a person is aiding in the passage or defeat of legislation, which public relations practitioners often do. Legal statutes for lobbying state lawmakers vary by state.

SEC Form 8-K

Form 8-K provides current information about a corporation so investors can make informed buying decisions. Companies must file Form 8-Ks within four business days of corporate actions that would materially affect stock prices. Information is "material" whenever a reasonable investor would consider the news important in making an investment decision. Issuing a news release and then filing that news release on a Form 8-K is an appropriate way to make a fair disclosure.

Registering as a Foreign Agent

Registration of Foreign Agents Act of 1938 requires public relations professionals who represent a foreign government to register with the U.S. State Department. Anyone who acts in the United States as an agent of a foreign government without proper registration can suffer stiff penalties. This law grew out of practices by Carl Byoir and Associates in the 1930s on behalf of Nazi Germany and changed how public relations was practiced.

Sarbanes-Oxley

The Sarbanes-Oxley Act, passed in 2002, covers corporate auditing accountability, responsibility and transparency. The law, often called SOX, was enacted after revelation of accounting scandals at Enron and other major corporations between 2000 and 2002. Enron's CEO and CFO claimed they were not aware of the fraud the corporation had committed. SOX requires the CEO and CFO to sign certificates that say they have read and understood everything in company reports and that reports are complete and accurate. Other SOX provisions affect how information is disclosed and, therefore, affects public relations practice. Knowledge of what and when one's company must disclose is critical to executing public relations responsibilities.

Sections of the Securities Exchange Commission Laws Important to Public Relations Practice

The Securities Act of 1933 and the Security Exchange Act of 1934 were enacted following the 1929 stock market crash. These acts contain checks and balances for securities-related actions and remain in place today. The need for such legislation grew out of abuses in the securities industry. Investors' and brokers' devious practices were destroying small investors. While these laws are complex, certain sections directly relate to public relations practice as discussed below.

Quiet Period

The interval between when a company registers a public offering of securities (stocks or bonds) with the SEC and the time the SEC declares the registration effective. At that point the company can offer the securities for sale. During Quiet Period, a company generally can't issue any information that might affect the stock price or be perceived as "front-running" the stock offering.

The Security Exchange Act of 1934 Mandates Disclosure

While the actual legislation says little specifically about publicity, the regulations apply to how we practice public relations. The real aim is to level the playing field for all investors. The law requires filing specific information with the SEC to make it available to the public. SEC regulations don't specifically enforce or prompt timely disclosure, but rules of the stock exchanges do. Investor and media relations professionals deal most directly with these laws.

Rule 10 b-5 of SEC 1934

concerns fraud in disclosure. An organization has the legal responsibility to ensure the information it releases is both accurate and complete. This standard applies to all publications, including speeches, releases and all published materials.

Rule 5c of the Security Act of 1933

deals with the registration of securities and led to the embargo of publicity materials during a specific timeframe — frequently called "gag period" — because these materials could be construed as an effort to sell a new security. The gag period should not be confused with a blackout. Several types of blackouts exist in contracts, policies and business activities. Two common blackouts relate to employee benefits and political campaigns. A human-resources blackout is a temporary period during which access, often to retirement or investment funds, is limited or denied. In addition, a blackout can refer to a political party's restriction on advertising for a set period before an election.

A 1963 SEC Study of the Securities Market

defined insider trading, material information and violations of each. Rules against insider trading encourage timely disclosure of material information in a further attempt to level the playing field between small and large investors. Material information is any news that could influence a reasonable investor's decision to buy or sell stock. The study showed concrete examples of how public relations practitioners used news media to disseminate false and misleading information, or deliberately withheld information from news media.