Chairman Cox and Blogging

The WSJ did a story on the ten year anniversary of the blog. The story included interviews with a number of people about the influence of blogs, including SEC Chairman Christopher Cox.  Interestingly, as he talks about the importance of blogs, he provides a reminder that blogs can transgress the securities laws, something brought home by the disclosure that the SEC is investigating John Mackey at Whole Foods for his anonymous posts in an investor discussion forum.  Unfortunately, Chairman Cox would not reveal his favorite blogs so we do not know if The Race to the Bottom is among them.  We include the entire interview.

• Blogs can contribute a great deal in the world of finance, which turns on information -- the newer, the better. As investors strive to make sense of the ever-higher mountains of data that we're buried under, the services of bloggers, whom we can imagine sitting at home in their pajamas trolling the Internet for us, free of charge, are likely to be an increasingly consequential addition to the investor's tool kit.

  To be sure, the blogosphere is subject to all of the same risks as the Internet itself. Many blogs are loaded with vanity posts, half-truths, rumors, and even intentional distortions. Others have spotty quality. The Securities and Exchange Commission's Office of Internet Enforcement has discovered several fraudsters operating blogs on the Web.

  There's no question, however, that among the ranks of legitimate bloggers, the corporate world is well represented, although some executives have undoubtedly hired professionals to blog in their stead. And, of course, you'll have seemingly unlimited choices when it comes to selecting your favorite Web-based market analyst. Not surprisingly, when it comes to the new financial-reporting language of XBRL and interactive data, blogs such as blog.hitachixbrl.com are a far more likely place to find the latest scoop than, say, your local library.

  When, in September 2006, I posted on one executive's blog (search for "Jonathan Schwartz" + "Christopher Cox" and you can find it), it immediately became clear how quickly news can spread. The exchange drove home the point that in carrying out the SEC's mission, Web-based disclosure will be of growing importance.

  On his blog, Mr. Schwartz, chief executive of Sun Microsystems, challenged the commission to clarify that the use of blogs like his could be consistent with our regulations requiring public companies to share news with the public at the same time they give it to market professionals. As a result of that exchange, the SEC is moving forward on that initiative, aided by thoughtful commentary from outside our own cathedral, some of it found on blogs.

  Do bloggers portend more lasting ramifications for the securities world? But of course. Shareholders are on the move, and technology has given them a cheaper and more-effective means to communicate. From improved price discovery to better corporate governance, investors, markets, managements and boards will never be the same.

  Favorite blogs: Mr. Cox prefers not to specify any favorite blog because "the way that some SEC followers hang on every agency pronouncement will lead someone to decide that monitoring the blog is both a new compliance burden and a guide to the hidden meanings of agency thinking."