The Securities and Exchange Commission has clarified its rules on Regulation Fair Disclosure, saying that public companies can use social media outlets like Facebook or Twitter to announce key company information – just so long as the investors are made aware which social media accounts may be posting such information beforehand.
“The SEC’s report of investigation confirms that Regulation FD applies to social media and other emerging means of communication used by public companies the same way it applies to company websites,” says the SEC.
The SEC didn’t recognize company websites as proper disclosure channels until 2008.
“One set of shareholders should not be able to get a jump on other shareholders just because the company is selectively disclosing important information,” said George Canellos, Acting Director of the SEC’s Division of Enforcement. “Most social media are perfectly suitable methods for communicating with investors, but not if the access is restricted or if investors don’t know that’s where they need to turn to get the latest news.”
This ruling stems from an SEC investigation into the Facebook activities of Netflix CEO Reed Hastings. Back in December of 2012, Hastings ran afoul of the SEC when he made a post on Facebook announcing that the company had topped 1 billion hours of streaming per month.
The SEC claimed the post violated Regulation FD, as the disclosure didn’t appear in an official filing or a press release. Hastings had not disclosed to investors that he would be using his Facebook page to report important information.
Just a couple of months ago, Hastings made it clear that he wouldn’t be backing down on this, as he felt that he did nothing wrong.
“I wasn’t setting out to set an example. I was sharing something to these 200,000 people,” Hastings said. “I’m not going to back down and say it’s inappropriate. I think it’s perfectly fine. Sometimes you’re just the example that triggers the debate.”
In clarifying these rules the SEC has also cleared Hastings, saying that they recognize that there had been market uncertainly about Regulation FD and social media. Thus the need for the clarifications.
“The report of investigation explains that although every case must be evaluated on its own facts, disclosure of material, nonpublic information on the personal social media site of an individual corporate officer — without advance notice to investors that the site may be used for this purpose — is unlikely to qualify as an acceptable method of disclosure under the securities laws. Personal social media sites of individuals employed by a public company would not ordinarily be assumed to be channels through which the company would disclose material corporate information.”
So, Reed Hastings and others like him can avoid all the hoopla if they simply make it clear to investors that their Facebook or Twitter profiles will be used for divulging key information. As long as that fact is known, companies, CEOs, COOs, or whoever have the right to post investor relations materials on social sites.
