Recognizing the growing popularity of social media and its importance to how companies conduct business, the U.S. Securities and Exchange Commission (SEC) announced in an April 2, 2013 report that public companies may use social media outlets--including personal social media sites of their corporate officers--to share material corporate information provided that these companies "take steps sufficient to alert investors" of these communications.
The SEC's conclusion stemmed from an investigation of a situation in which Reed Hastings, the CEO of Netflix Inc., announced on his personal Facebook page that Netflix had streamed one billion hours of content in June 2012. The SEC called into question whether Netflix Inc. had appropriately complied with Regulation Fair Disclosure (FD) and Section 13(a) of the Securities Exchange Act.
Regulation FD and Section 13(a) are designed to protect investors by requiring registrants to disclose to the general public any material, nonpublic information that is provided to certain securities professionals or shareholders if it is reasonably foreseeable that they will trade on such information.
Social Media Outlets Rules Apply to 2008 Interpretive Guidance
The SEC is no stranger to how companies use emerging technologies to disseminate corporate information. In 2008, the SEC issued interpretive guidance on the interaction between Regulation FD and the use of company websites. Rather than outlining definitive rules, the SEC's 2008 interpretive guidance provides public companies with points to consider in determining whether communications on their corporate websites meet the requirements of Regulation FD.
Similarly, regarding compliance of social media posts with Regulation FD, the SEC did not issue separate rules or additional interpretive information but referred registrants to its 2008 interpretive guidance. The SEC believes that the 2008 interpretive guidance applies to social media outlets because they "are not fundamentally different from the ways ... websites, blogs and l'push' technologies such as] RSS feeds ... are used."
The 2008 interpretive guidance was not intended to be prescriptive but was "designed to be flexible and adaptive ... with a factor-based framework for analysis, rather than static rules applicable only to websites." Thus, whether an individual social media communication complies with Regulation FD will depend on a public company's specific facts and circumstances.