- Guidance in Assessing Materiality
The following are developments likely to require prompt disclosure: (i) changes
in share ownership that may affect control of TurboSonic Technologies,
Inc. ("TurboSonic"), (ii) changes in corporate structure,
such as reorganizations and amalgamations, (iii) take-over bids,
(iv) major corporate acquisitions or dispositions, (v) changes
in capital structure, (vi) significant borrowings, (vii) public or
private issuances of additional securities, (viii) development of new
products and developments affecting TurboSonic’s resources, technology,
products or markets, (ix) entering into or loss of significant
contracts, (x) firm evidence of significant increases or decreases
in near-term earnings prospects, (xi) changes in capital investment
plans or corporate objectives, (xii) significant changes in
management, (xiii) significant litigation, (xiv) major labor
disputes or disputes with contractors or suppliers, (xv) events of
default under financing or other agreements, (xvi) any other
developments relating to the business and affairs of TurboSonic that would
reasonably be expected to significantly affect the market price or value
of any of its securities or that would reasonably be expected to have a
significant influence on a reasonable investor’s investment decisions.
- Ensuring Accuracy
Our Chairman of the Board and CEO, our CFO, our President, and our Audit Committee Chairman, are responsible for the execution
of TurboSonic’s Disclosure Policy. They are responsible for continuous
disclosure and will continually ensure that they are seeking information
from all relevant sources within TurboSonic and will question these
sources to verify how the information was derived and to independently
assess whether the information has a reasonable basis and is both accurate
and complete.
Formal disclosure documents will be subjected to a disciplined review
process involving, at a minimum, the following steps and procedures to
ensure compliance: (i) circulation of draft documents among senior
management for their review and comment; (ii) review by TurboSonic’s
officers most knowledgeable about the particular matter; and
(iii) review by counsel.
Unfavorable information will be disseminated as quickly as favorable
information and care will be taken to ensure that press releases are
balanced and do not contain promotional hype.
Forward-looking information will be accompanied by meaningful,
cautionary statements identifying important factors that could cause
actual results to differ materially from projected. Particular care will
be taken to avoid selective disclosure of forecast information because of
its extreme price sensitivity.
If TurboSonic subsequently discovers that a press release was factually
and materially incorrect at the time disclosed, it will publicly announce
and correct the error once it is discovered.
- Dealing with Difficult Disclosure Issues
Difficult issues arise in the "grey area" involving
subjective determinations of materiality. Considered judgment is required
on a case-by-case basis in assessing whether certain events constitute
"material information" requiring disclosure. Where the
difficulty in assessing materiality arises from lack of completeness or
certainty of the information, disclosure will be delayed until management
is certain as to the accuracy of the information.
The task of assessing whether particular events constitute
"material information" is made more difficult given that
information which may not be reasonably expected to affect market price
might nevertheless affect the underlying or intrinsic value of TurboSonic’s
securities. In some circumstances, even non-price sensitive
information might reasonably be expected to have a significant influence
on investors’ investment decisions and therefore may be regarded as
material since it significantly affects the total mix of information
available to investors.
In such circumstances, two alternative approaches are available.
Clearly, the cautious approach, both with respect to legal compliance and
with respect to protecting TurboSonic's reputation for disclosure
integrity in the market, is to make disclosure. This ensures that
TurboSonic’s public disclosure records contain a complete record of all
significant events.
Alternatively, if a decision is made not to disclose, TurboSonic will
clearly document both the conclusion that the event in question does not
constitute material information and the process by which such
determination has been arrived at. In difficult situations, it may also be
prudent to discuss the materiality of the event with officials of Nasdaq.
If the event does subsequently impact the market price, and management’s
judgment is second-guessed with the benefit of hindsight, it will be
invaluable to be able to demonstrate that the materiality assessment was
made on a principled basis in the course of a thorough process of review
and consideration.
- Designated Spokespersons
It is easier to avoid selective disclosure if only designated
spokespersons speak to analysts or the press. Therefore, TurboSonic has
selected a limited number of authorized spokespersons (and backups)
responsible for communicating with analysts, the media and investors. The
primary authorized spokesperson is the President. The authorized
spokesperson will be kept fully appraised of all TurboSonic developments
and all employees are instructed to refer all inquiries to the designated
spokesperson. The Assistant Secretary is also an authorized spokesperson.
From time to time, TurboSonic may make available other company officers
and representatives to address specific topics and, under such
circumstances, it will be stated that these individuals are speaking on
behalf of TurboSonic and are covered by Regulation FD.
Channeling communications through a limited number of spokespersons who
are each aware of TurboSonic's disclosure obligations and the legal and
regulatory requirements will make it easier to avoid selective disclosure
problems. To promote consistency and to monitor disclosures, other
employees are prohibited from communicating information about TurboSonic.
- Analysts’ Meetings
TurboSonic may hold periodic information sessions with its major
institutional investors and analysts from the brokerage houses covering
its securities. These meetings may consist of one-on-one or group meetings
and frequently take the form of telephone conference calls.
Conference calls will typically be held immediately after the release
of quarterly earnings results, as well as on an "ad hoc" basis
after other major announcements.
Conference calls provide a forum for TurboSonic to elaborate on
corporate announcements initially disseminated by press releases. Care
will be taken, however, not to divulge any new material information in the
conference call, or to materially modify or expand upon information
contained in the press release. If further material information is
inadvertently disclosed, a supplemental press release must be immediately
disseminated.
All market participants will be provided with equal access to the
information provided in the conference call if it could potentially affect
investment decisions. This will be achieved by, for example, publishing an
800 number which will permit interested parties not specifically invited
to participate in a two-way communications mode to participate in a
listening mode only or through live internet "web-casts."
Conference calls will also be made available for playback. The more
liberal the access provided to the information disseminated in the
conference call, the less risk TurboSonic will face regarding allegations
of selective disclosure.
The conference call will be carefully scripted to promote order and
efficiency. The call will be conducted by a senior corporate officer who
is aware of what information is already on the public record and who is
attuned to the. sensitivities of handling undisclosed material
information. The designated spokesperson will be accessible, well informed
and empowered to discuss corporate matters.
Standard procedures for analysts meetings will include a debriefing
session held immediately after the meeting to review what information was
discussed, and to confirm that no material information was disclosed. In
the event that material information has been inadvertently disclosed on a
selective basis, TurboSonic will issue a general corrective press release
immediately.
Meetings with analysts will be used to explain or elaborate on
information already in the public domain and to discuss trends impacting
on TurboSonic. TurboSonic’s officers will decline to answer an analyst’s
questions where the answers, individually or cumulatively, would provide
price sensitive information. The designated spokesperson will cut off
questions regarding sensitive subjects early in the discussion by
indicating up front that TurboSonic is not willing to discuss certain
specific issues.
One-On-One Meetings
Face-to-face meetings are a fact of life for TurboSonic in its dealings
with analysts. They are an indispensable way for analysts to meet
personally with corporate officers and give such officers the opportunity
to build good will and to make TurboSonic more approachable to analysts.
They permit analysts to assess directly the competency, integrity and
frankness of corporate officers and to ask legitimate questions about
TurboSonic and its strategies, performance and prospects.
One-on-one analysts meetings inherently entail the likelihood of
selective disclosure of information and comment that has not been publicly
disclosed. In this context, extreme care must be taken to discuss only
information that is already public or, if not previously disclosed
publicly, that is not material; i.e., care must be taken to guard against
the unauthorized, careless or selective disclosure of information regarded
as "material" for purposes of applicable securities legislation.
"Tipping" of undisclosed material information constitutes a
violation of securities laws and imposes an obligation on an analyst or
institutional investor who knowingly receives such information to refrain
from trading.
Material non-public information which cannot be selectively disclosed
includes all information that would have, or which would reasonably be
expected to have, a significant impact on the market price or value of
TurboSonic’s securities.
- Commenting on Analysts’ Reports
TurboSonic will take special precautions to avoid liability when
invited to review or comment upon draft analysts’ reports or models.
TurboSonic will limit its comments to a review of factual information,
will not embrace soft information, and will limit its conclusions to
historical fact. TurboSonic will document the comments given so that it
can later demonstrate that such comments were given in good faith and with
a reasonable basis in fact. Special care will be taken when commenting on
drafts of reports that make significant changes in earnings predictions or
investment ratings.
TurboSonic will refrain from commenting on analysts’ earnings
forecasts, particularly where there is any chance that they may become
"entangled" in the report and thereby regarded as having assumed
a duty to ensure the forecasts’ accuracy.
- Distributing or Referring to Analysts Reports
TurboSonic will limit its involvement to providing interested persons
with a list of analysts covering TurboSonic and referring requests for
reports to the analysts’ respective firms.
As a general rule, TurboSonic will not circulate copies of analyst
reports.
- Commenting on Analysts’ Earnings Estimates
Generally, TurboSonic will not respond to queries respecting earnings
estimates, except where there will be a significant increase or decrease
in earnings in the near future, in which case TurboSonic will make a
general disclosure of the fact.
If TurboSonic comments publicly on earnings estimates, however, it
assumes an updating obligation and must continue to assess whether future
updates or corrections are necessary. It must respond to future enquiries
and rumors and must update or correct earlier earnings projections. If the
response contains material information, it must be generally disseminated
by press release.
TurboSonic imposes a quiet period for an interval of one week prior to
the end of any quarter until the release of quarterly earnings during
which time TurboSonic’s management will be prohibited from commenting on
analysts’ inquiries respecting earnings estimates.
- Taking Analysts Over the Wall
Extreme care will be taken in permitting TurboSonic’s financial
advisors to bring analysts "over the wall" to permit them to
participate in investment banking projects. In normal circumstances,
investment dealers will maintain a Chinese wall between their analysts and
their investment banking departments. This separation permits investment
bankers to consult freely with their issuing clients about their financing
needs, acquisition strategies and earnings prospects without tainting
analysts in the same firm with inside information about TurboSonic.
At times, however, it may be deemed desirable to bring an analyst
"over the wall" to assist in an investment banking project, to
assist in due diligence investigations, to support sales and marketing
efforts or to help to generate earnings estimates for use in forecasts or
projections. Such involvement may be critical to the success of a project
where an analyst’s specialized knowledge of the industry may be
indispensable in providing the expertise necessary to complete the
project.
TurboSonic is aware that in such circumstances, the analyst may be
"tainted" and will be prohibited from issuing research reports
or otherwise advising with respect to TurboSonic's securities while in the
possession of material non-publicly disclosed information.
- Responding to Market Rumors
TurboSonic does not have a general duty to monitor and to correct or
verify rumors in the market unless those rumors can be attributed to
TurboSonic or a stock exchange requests disclosure when the rumor is
causing unusual activity in TurboSonic’s securities.
Generally, TurboSonic will adopt a "no comment" policy with
respect to rumors that are not attributable to TurboSonic; i.e., by
stating "it is TurboSonic’s policy to neither confirm nor deny
rumors". Statements such as "there are no significant corporate
developments at this time" will be avoided as they can signal the
market and defeat the purpose of the policy. TurboSonic will take
precautions to ensure that it is not the source of rumors. In
circumstances where TurboSonic is required to vary from its policy of not
commenting on rumors, the announcement will promptly clarify or deny the
rumor and will make clear that TurboSonic is varying from its usual
policy.
- Earnings Warnings
TurboSonic will generally make a public release when it becomes aware
that earnings will be significantly below the range of street
expectations.
- Promoting Equal Access
TurboSonic will promote the equitable dissemination of material
information by promptly responding, without discrimination, to all
legitimate requests for information. Information will be made equally
available to large and small investors and equally to buy-side and
sell-side analysts.
- Electronic Access to Data
Corporate information will be made available electronically through
TurboSonic’s website accessible via the Internet.
Information on the web site will include a press release archive and
links to SEC filings.
- Plant Tours
In tours of facilities, access to operating
personnel will be strictly controlled to ensure that analysts do not
elicit confidential information in discussions with staff and employees.
