The Securities and Exchange Commission (SEC) clarified today that companies are allowed to use social media to announce key information and still be in compliance with the Regulation Fair Disclosure (Regulation FD) as long as the company alerts investors beforehand which social network to check.
This confirmation by the SEC builds on its guidance in 2008 that determined the use of websites to share company information as effective as long as investors were aware of where to look for said information.
“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.”
The SEC’s Regulation FD requires companies to distribute its information in a way that is easily accessible to the general public. This requirement was set in an effort to ensure all investors have the ability to gain access to important company information simultaneously.
“Companies should review the Commission’s existing guidance — it is flexible enough to address questions that arise for companies that choose to communicate through social media, and the guidance does so in a straightforward manner,” said Lona Nallaengara, Acting Director, Division of Corroborate Finance, SEC.
The investigation of social media as a communication tool for companies was launched due to Netflix CEO Reed Hastings use of his personal Facebook Page to share that Netflix’s monthly online viewing had exceeded one billion hours for its first time. As Netflix did not release a press release with the information, the SEC wanted to determine whether social media was a viable means of communication of such metrics.