On April 2, 2013, the SEC issued guidance regarding a company’s use of social media to disclose information or make announcements.
The SEC investigated whether Netflix, Inc. and its CEO, Reed Hastings violated Securities laws when Hastings used his personal Facebook page to announce that Netflix had streamed 1 billion hours of content in the month of June 2012. Netflix did not file a Form 8-K with the SEC, issue a press release or otherwise publicly announce this information. Neither Netflix or Hastings had previously used a social media outlet to make an announcement.
So, what was the problem? Well, the SEC was unsure as to whether 1) that statement violated Regulation FD, and 2) it complied with the Commission’s 2008 Guidance on the Use of Company Web Sites. Since the 2008 disclosure was focused on the use of company websites, the Commission was unsure of how the use of social media sites differed.
Ultimately, after investigating, the SEC decided not to pursue an enforcement action, but rather wants to take advantage of this opportunity to clarify that Regulation FD and the SEC’s 2008 guidelines and framework apply to social media. The SEC stresses that a public company should tread lightly. Before posting on Facebook, Twitter or other social media outlet the CEO, (with the assistance of securities counsel) needs to consider whether Reg FD applies to such disclosure. If so, then determine:
- Is any potential recipient of information of the social media post a shareholder, securities professional or other type of person enumerated in Reg FD?
- Is the information non-public and material?
- If so, then the information must either be simultaneously filed in a Form 8-K or disclosed in a manner “reasonably designed to provide broad, non-exclusionary distribution of the information to the public.”
The key is to make sure that the Company takes proper steps to ensure that the public is on notice as to each outlet for material, nonpublic information about the issuer and has access to those outlets is available to those who want it.
If your Company uses a Social Media site you should clarify usage guidelines for employees, and take steps to make the public aware of each specific channel through which you expect to disseminate material, nonpublic information.
Author: Jennifer Trowbridge, Stoecklein Law Group, LLP