SEC Gives Thumbs Up for Company Announcements Through Social Media
The SEC issued a report that makes it clear that companies can use social media platforms, e.g. Facebook and Twitter, to announce key information to investors to comply with Regulation Fair Disclosure (Regulation FD) so long as the investors have been alerted about the announcement and which social media outlet being used.
The SEC’s report 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. In 2008, the SEC issued guidance that clarified that websites can serve as effective means of communication to announce information to investors so long as the investors are aware of where to find the information.
Regulation FD requires companies to distribute material information in a manner that is reasonably designed to have the information reach the general public broadly. The regulation is intended to ensure that all investors have the ability to gain access to material information as the same time, eliminating any unfair advantages to one shareholder over another.
Today’s report stems from an inquiry the Division of Enforcement investigated into a post by Netflix CEO Reed Hastings on his personal Facebook page. Hastings commented that Netflix’s monthly online viewing had exceeded one billion hours for the first time. This information was not reported by Netflix through a press release of Form 8-K. Following the post, Netflix’s stock price rose from $70.45 to $81.72 the following day. The SEC did not initiate an enforcement action or allege any wrongdoing by Netflix or its CEO, but recognized that it needed to clarify any market confusion.
The report explains that although each case will be evaluated on its own facts, disclosure of material, non-public information through the personal social media site of an individual executive officer is unlikely to quality as an acceptable method of disclosure under the securities laws.
What does this all mean? It means that companies are permitted to disclose certain material information through their company Facebook, Twitter, or other social media site and such disclosure (so long as investors are pointed to the announcement and it contains the necessary information) will likely satisfy Regulation FD.
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