SEC Permits Corporate Communications Via Twitter, Facebook, Other Social Media

“The SEC’s release confirms that companies are permitted to announce material news through social media, provided investors know when and where to expect it.” (Orrick)

The Securities and Exchange Commission has decided to let corporate communications move into the 21st Century.

 Backing off from an earlier position that Netflix CEO Reed Hastings violated Regulation FD with a Facebook posting that bragged about the company’s increased online viewing hours, the agency said this week that public companies can use social media to communicate with shareholders. With an important caveat: they must tell investors in advance which channels they will be using to communicate company announcements.

Three takeaways:

1. Regulation FD remains in force:

“The SEC’s report confirms that Regulation FD applies to social media and other emerging means of communication the same way it applies to company websites … [and] clarifies that company communications made through social media channels could constitute selective disclosures and, therefore, require careful Regulation FD analysis.” (Pillsbury)

2. It only works if the social media accounts are public:

“George Canellos, acting director of the SEC’s enforcement division said in a statement to Bloomberg, ‘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.’” (Shipkevich PLLC)

3. Bottom line: tweeting CEOs must still exercise caution:

“According to the SEC, 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. The SEC opines that 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.” (Leonard, Street and Deinard)

The updates:

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