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From Wikipedia, the free encyclopedia

See also: Public relations

Investor relations (IR) is a "strategic management responsibility that is capable of integrating finance,
communication, marketing and securities law compliance to enable the most effective two-way
communication between a company, the financial community, and other constituencies, which
ultimately contributes to a company's securities achieving fair valuation." as defined by National
Investor Relations Institute (NIRI).[1] IR is also function to assess the impact of a company actions (e.g.
acquisitions, change in dividend policy, introduction of new product) on the company's position in the
capital markets (e.g. stock price, competitive position, public perception).[2]

The term describes the department of a company devoted to handling inquiries from shareholders and
investors, as well as others who might be interested in a company's stock or financial stability.

Structure

Typically investor relations is a department or person reporting to the chief financial officer (CFO) or
treasurer. In some companies, investor relations is managed by the public relations or corporate
communications departments, and can also be referred to as "financial public relations" or "financial
communications." In smaller companies, the IR function is often outsourced to independent investor
relations firms. Investor relations is considered a specialty of public relations by the U.S. Department of
Labor.[3]

Many larger publicly traded companies now have dedicated IR officers (IROs), who oversee most aspects
of shareholder meetings, press conferences, private meetings with investors, (known as "one-on-one"
briefings), investor relations sections of company websites, and company annual reports. The investor
relations function also often includes the transmission of information relating to intangible values such
as the company's policy on corporate governance or corporate social responsibility. Recently, the field
has trended toward an increasingly popular movement for "interactive data", and the management of
company filings through streaming-data solutions such as XBRL or other forms of electronic disclosure
have become prevalent topics of discussion amongst leading IROs worldwide.

The investor relations function must be aware of current and upcoming issues that an organization or
issuer may face, particularly those that relate to fiduciary duty and organizational impact. In particular, it
must be able to assess the various patterns of stock-trading that a public company may experience,
often as the result of a public disclosure (or any research reports issued by financial analysts). The
investor relations department must also work closely with the Corporate Secretary on legal and
regulatory matters that affect shareholders.

While most IROs would report to the chief financial officer, they will also usually report to the chief
executive officer (CEO) and board of directors and/or president of the corporation. This means that as
well as being able to understand and communicate the company's financial strategy, they are also able
to communicate the broader strategic direction of the corporation and ensure that the image of the
corporation is maintained in a cohesive fashion.

The president or CEO of the company or corporation would have direct responsibility in relating the
company's overall posture directly to the shareholders or the investors.

Due to the potential impact of legal liability claims awarded by courts, and the consequential impact on
the company's share price, IR often has a role in crisis management of, for example, corporate
downsizing, changes in management or internal structure, product liability issues and industrial
disasters.

The most highly regarded professional member organization for investor relations in the United States is
the National Investor Relations Institute, or NIRI. In addition to numerous professional development
seminars and meetings, NIRI offers a certification program, the Investor Relations Charter.[4] In the
United Kingdom, the recognized industry body is The Investor Relations Society, while in Canada, the
professional association is called the Canadian Investor Relations Institute, or CIRI. Australia's
professional organization is known as the Australian Investor Relations Association (AIRA).

The Sarbanes–Oxley Act

The Sarbanes–Oxley Act of 2002 significantly increased the importance of investor relations in the
financial markets. The act established new requirements for corporate governance and regulatory
compliance, with an increased emphasis on accuracy in auditing and public disclosure. Notable
provisions of the act which apply to investor relations include enhanced financial disclosures and
accuracy of financial reports, real-time disclosures, off-balance-sheet transaction disclosures, pro forma
financial disclosures, management assessment of internal controls, and corporate responsibility for
financial reports.[5] More specifically, Sarbanes–Oxley sections 301, 302, 404, and 802 have been of
particular interest to companies improving corporate compliance. Similar to Sarbanes–Oxley are the
Keeping the Promise for a Strong Economy Act (Budget Measures), 2002 in Canada, Financial Security
Law of France in France, and J-SOX in Japan. The European MiFID Directive, although principally
concerned with investor protection, also covers regulation and compliance for listed European
companies.

Controversies

Robinhood GameStop incident

Robinhood is a popular investing app that launched on April 18, 2013. Gamestop was undergoing a
significant short squeeze, sending the stock price sky-high which put pressure on hedge funds and
Robinhood's clearing operations. The decision to pull stocks from its platform did not resonate well with
users. Robinhood claimed the decision was made to protect its customers and was necessary for risk
management reasons. Robinhood's brand was built on the promise that it was "on a mission to
democratize finance for all." It takes companies a long time to build a brand, but they can lose it almost
instantaneously.[6] The company is known for its appeal to young and novice investors due to the ability
to trade stocks without any commission charge. However, Robinhood became the focus of the
controversy after it decided to freeze trades for GameStop stock on Jan. 28.[7] Shares of the video game
retailer spiked after traders on Reddit began frantically buying the company's stock.[7]

A Robinhood user filed a class-action lawsuit accusing the popular trading app of purposefully and
knowingly to "manipulate the market for the benefit of people and financial institutions who were not
Robinhood customers." The lawsuit also accused Robinhood of negligence and breached its fiduciaries'
duties of keeping its clients interested as a top priority. Another user filed a lawsuit claiming the decision
to halt trades of Blackberry, Nokia, and AMC theaters "to protect institutional investment at the
detriment of retail customers."[8]

References

"Standards of Practice for Investor Relations" (PDF). National Investor Relations Institute (NIRI). p. 2.
Archived from the original (PDF) on 6 February 2023. Retrieved 6 February 2023.

Ryan, Thomas; Jacobs, Chad (18 February 2005). Using Investor Relations to Maximize Equity Valuation.
John Wiley & Sons. p. 3. ISBN 9780471708520. Retrieved 6 February 2023.

Public Relations Specialists

"NIRI – IRC Certification FAQs". www.niri.org. Retrieved 2018-06-28.

Benjamin Mark Cole, ed. (2004). The New Investor Relations: Expert Perspectives on the State of the
Art. Bloomberg Press. ISBN 1-57660-135-8.

Aten, Jason (2021-01-30). "Robinhood Destroyed Its Brand in Less Than a Day". Inc.com. Retrieved
2021-04-20.

Gonzalez, Oscar. "Robinhood backlash: What you should know about the GameStop stock controversy".
CNET. Retrieved 2021-04-07.

Macias, Kevin Breuninger,Thomas Franck,Amanda (2021-01-28). "Robinhood customer sues trading app
over GameStop restrictions". CNBC. Retrieved 2021-04-20.

External links

IR magazine

IR Web Report

IR GO
https://fortune.com/2021/02/19/robinhood-brand-damage-gamestop-hedge-funds-wallstreetbets-
reddit-stocks-gme-amc/

Categories: Communications managementStock marketCorporate financeInvestment

This page was last edited on 22 February 2023, at 18:24 (UTC).

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