A report from the Securities and Exchange Commission clears companies to use social media outlets like Facebook and Twitter to announce key information, provided that investors have been alerted about which social media will be used.
Under Regulation FD, public companies must distribute material information broadly and non-exclusively. The SEC report and the investigation that produced it make clear that social media can be used in compliance with Reg FD, provided it’s made clear that the information will be made available through them.
“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 report of investigation stems from an inquiry the Division of Enforcement launched into a post by Netflix CEO Reed Hastings on his personal Facebook page stating that Netflix’s monthly online viewing had exceeded 1 billion hours for the first time. Netflix did not report this information to investors through a press release or Form 8-K filing, and a subsequent company press release later that day did not include the information. Neither Hastings nor Netflix had previously used his Facebook page to announce company metrics, and they had never before taken steps to alert investors that Hastings’ personal Facebook page might be used as a medium for communicating information about Netflix. Netflix’s stock price had begun rising before the posting, and jumped even further after the Facebook post.
The SEC did not initiate an enforcement action or allege wrongdoing by Hastings or Netflix.
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