The Securities and Exchange Commission (“SEC”) has issued a report clarifying that public companies may use social media sites, such as Facebook and Twitter, to release key company information in compliance with Regulation Fair Disclosure (“Regulation FD”) in certain circumstances. The company, however, has to forewarn its investors that it may use the company’s social media pages to disseminate material company information.
Regulation FD and Section 13(a) of the Exchange Act mandate that companies broadly disseminate material information to the general public. All investors must have the ability to gain access to material information at the same time. Public companies are prohibited from selectively disclosing material, nonpublic information to individuals where it is reasonably foreseeable that the individuals will trade on that information, before it is made available to the general public.
The report followed the SEC’s investigation into a July 2012 post by Netflix CEO Reed Hastings on his personal Facebook page that Netflix’s monthly online viewing had exceeded one billion hours for the first time. No prior Netflix information had previously been announced on Hasting’s personal Facebook page and Netflix shareholders had not been informed that Hastings’s Facebook page may be used to disclose company information. According to the SEC, Hasting’s post was not accompanied by a press release, a post on Netflix’s own web site or Facebook page, or a Form 8-K filing. The SEC did not initiate an enforcement action or allege any wrongdoing by Netflix or Hastings.
The SEC subsequently commenced an investigation to address uncertainty about the application of Regulation FD to announcements made on social media sites. According to the report, disclosure of material, nonpublic information on a corporate officer’s personal social media site, 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 Regulation FD.