PayPal gives retailers something to think about

PayPal has revised its disclosure practices for material information in a way that could serve as a blueprint for retailers in the wake of a major insider trading bust that took down 32 hackers and brokers who allegedly reaped $100 million during a five year scheme to steal press releases.

The global payments company said it planned to use online and social media channels to disseminate material, non-public information. The company still plans to make disclosure using traditional press releases and filings with the Securities and Exchange Commission. However, as recent events have shown, those methods of complying with SEC’s fair disclosure rules have potential weaknesses.

The highest profile recent example involved a federal investigation which shut down a ring of Ukrainian hackers and U.S. based stock traders who are alleged to have netted $100 million during five year operation. The group of 32 individuals allegedly stole 150,000 press releases containing sensitive information from the likes of Business Wire, PR Newswire and Marketwired. Retailers commonly use those services to distribute sensitive information such as key executive moves, mergers and acquisitions and financial results, information that can have a dramatic impact on a company’s share prices when it becomes publicly available.

PayPal’s solution to ensure it distributes material information simultaneously is to rely on methods that offer instantaneous sharing without the need for an intermediary. The company said it intends to use its investor relations website and other online and social media channels, including the company’s PayPal Stories Blog, Twitter handle and LinkedIn page, to disclose material non-public information and comply with its disclosure obligations under Regulation FD. The company advised its investors to monitor the new sources going forward.