A time-honored tradition for transparency – the news release

Treasury Secretary Timothy Geithner is facing an enormous challenge in seeking to restore shattered investor confidence in the aftermath of the "most severe global financial crisis in generations."

The silver lining in the current crisis is that Geithner has a mandate to redress many of the underlying issues that got us into our current predicament while creating the architectural framework for more efficient markets in the future.

From an investor relations perspective, the way forward is clear-cut - - a widely-disseminated news release distributed simultaneously.

What makes the solution intriguing is that it successfully transcends both time and technology, leveraging a communications medium that is more than a century old with a financial reporting format that is as fresh and promising as tomorrow.

The core communications conduit, the news release, which remains at the nexus of the disclosure process was born out of the need to reach a wide audience quickly and effectively, and to 'shine a light' on events that required context and perspective. Sound familiar? (Note: Ivy Lee issued the first press release following a railroad wreck in Atlantic City, NJ.)

A well-written news release, spotlighting the material data points, is a concise narrative that appeals to all audiences. It is clearly the information currency of choice, freely accessed by a broad range of constituents, ranging from Wall Street professionals to Main Street investors. The news release kicks off the transparency process and allows journalists, investors, analysts, regulators, etc. to analyze, interpret and publicize information. It, in effect, starts the conversation in an open, transparent manner.

The SEC's Regulation Fair Disclosure, established in 2000 provides a framework for all market participants to have equal access to material information that might influence their investment decisions. Consequently, this Regulation FD-compliant information infrastructure exists today; institutional and individual investors alike have simultaneous and real-time access to price-sensitive corporate information based on proprietary, secure Internet-based platforms developed by commercial news services, such as Business Wire.

The fact that full and fair "pushed" disclosure is already a reality--and fully operational--lightens Secretary Geithner's load considerably; he does not have to concern himself with "reinventing the wheel." Geithner can channel all his energies deciding the sectors that need to be regulated, instead of getting sidetracked on the mechanics of information dissemination. The system is already in place--and it works exceedingly well when utilized.

The U.S. disclosure model is recognized as the global gold standard, and served as the model for the European Union's Transparency Obligations Directive which was launched in January 2007. Perhaps we simply need to expand that system to those areas that were operating under the radar screen and not making many (or even any) disclosures--derivatives, CDOs, unregistered hedge funds, etc.

The other major tool available to Geithner is XBRL, a programming language that promises to usher in a new era of transparency. Disclosure is being elevated to an entirely new dimension with the phased-in adoption of XBRL, beginning this July.

XBRL is essentially tagged data, facilitating comparative analysis and data extraction based on a global standard that is machine-readable. Some observers have gone so far as to conclude that XBRL may ultimately prove to be more effective than granting new powers to regulatory agencies.

"FDR was no Milton Friedman, and neither was (Supreme Court Justice Louis) Brandeis, but they grasped what we seem to be forgetting, which is that markets are too complex for even the most powerful regulators to dictate," wrote Gordon Crovitz in his Wall Street Journal column. "Better transparency is the surest way to make markets more efficient and less volatile. Market wisdom results when more people access better information."

We might consider applying the "Transparency Rule" (Reg FD) to those sectors that have been operating in an information vacuum. As Justice Brandeis wisely observed, "sunlight is the best disinfectant." And more sunlight is exactly what is needed to avoid future toxic time bombs.

Author bio

Cathy Baron Tamraz, Business Wire President and Chief Executive Officer, oversees the company's day-to-day operations, long-term strategic planning, international expansion and global branding. She is headquartered in New York.