The SEC said Tuesday that companies can use social media outlets like Facebook and Twitter to announce key information in compliance with Regulation Fair Disclosure as long as investors have been alerted about which outlet will be used to disseminate such information.
A SEC report confirmed 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.
Regulation FD requires companies to distribute material information in a manner reasonably designed to get that information out to the general public broadly and non-exclusively, the SEC said. It is intended to ensure that all investors have the ability to gain access to material information at the same time.
The SEC report said 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.
“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.
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, the agency said.
“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,” Canellos said.
In 2008, the SEC said, it issued guidance clarifying that websites can serve as an effective means for disseminating information to investors if they’ve been made aware that’s where to look for it.
The SEC said its report of investigation stems from an inquiry its division of enforcement launched into a post by Netflix CEO Reed Hastings on his personal Facebook page stating that Netflix’s monthly online viewing had exceeded one billion hours for the first time.
Netflix did not report this information to investors through a press release or Form 8-K filing, and a subsequent company press release later that day did not include this information, according to the SEC.
Neither Hastings nor Netflix had previously used his Facebook page to announce company metrics, and they had never before taken steps to alert investors that Hastings’ personal Facebook page might be used as a medium for communicating information about Netflix, the SEC said.
Netflix’s stock price had begun rising before the posting, and increased from $70.45 at the time of the Facebook post to $81.72 at the close of the following trading day. The SEC said it did not initiate an enforcement action or allege wrongdoing by Hastings or Netflix.
In March, the SEC published a guidance update to clarify the obligations of mutual funds and other investment companies to seek review of materials posted on their social media sites and whether a filing with the Financial Industry Regulatory Authority would be required.