Earlier this month, the Securities and Exchange Commission issued a report that provides guidance to public companies that want to use social media to disclose important information about their business activities. The report grew out of an investigation of Netflix’s CEO, who used his own Facebook page to announce information about Netflix that had not been previously disclosed and could be viewed as material.
The SEC did not bring any enforcement action against Netflix or its CEO, but it did make clear that an SEC Rule–Regulation FD–applies to a company’s use of social media. Regulation FD provides that if a company or its representatives discloses material, non-public information to a select group of people who are likely to trade on the basis of that information, the company must also disclose that information in a non-exclusionary manner to the public. This is often done through a press release, SEC filing or the company’s website. Disclosure of such information on the personal social media site of a company officer, without advance notice that such site is used to disclose company information, likely runs afoul of Regulation FD.
Practices a public company may wish to consider if it intends to use social media:
- Disclose in its SEC reports, web site and press releases links to the specific sites the company intends to use, which should be accessible without charge.
- At the same time any material disclosures are made on the company’s social media site(s), such disclosure should be made via a press release or SEC filing.
- Remind company officers, directors and other representatives that they are not permitted to disclose material, non-public information about the company on their personal social media sites.