• by Wendy Davis  @wendyndavis, November 6, 2008

A new Securities and Exchange Commissions proposal regarding links on companies' Web sites conflicts with a federal law that limits liability for linking to material created by other publishers, according to a prominent Internet lawyer.

The SEC in August proposed new guidance regarding how companies distribute information online. Among other provisions, the SEC proposed that companies could be liable for fraud if they link to material created by other publishers that contains false information.

The problem with that approach, Goldman says, is that the 12-year-old federal Communications Decency Act provides that Web publishers are not responsible for material created by outside parties.

"The SEC cannot treat a company as a publisher or speaker of third party online content," wrote Goldman, director of Santa Clara University's High Tech Law Institute, in comments submitted to the SEC this week. "The case law has been virtually unanimous that Web sites are not responsible for third-party content."

In its August proposal, the SEC suggested that companies that link to outside content also explain why they are doing so and provide disclaimers. "A company including a hyperlink to a news article that is highly laudatory of management should consider explanatory language about the source and why the company is providing the hyperlink in order to avoid the inference that the company is commenting on or even approving its accuracy, or was involved in its preparation," the SEC wrote in August.

In another provision of the guidance, the SEC indicated that companies, in some circumstances, could disclose information on their own sites or blogs rather than by publishing the information via newswire. Business Wire and PR Newswire both filed objections to that part of the proposal. "We believe company Web sites should be supplemental to existing industry practices," David Armon, president of PR Newswire, wrote to the SEC.