Investors may soon be getting their financial information via social media. As long as companies apprise their investors about their social media strategy ahead of time, the Securities and Exchange Commission has approved publishing company news on social media sites such as Facebook and Twitter.
A personal Facebook post by Netflix Chief Executive, Reed Hastings, congratulating his team for exceeding one billion hours of video watched in a single month, instigated a December S.E.C. investigation raising concerns that he violated Regulation Fair Disclosure (FD).
Regulation FD requires companies to distribute material information “in a manner reasonably designed to get that information out to the general public broadly and non-exclusively.” It is intended to ensure that all investors have the ability to gain access to material information at the same time.
The S.E.C.’s Report of Investigation used the guidelines approved in 2008 for distributing information on websites. The report approved announcing key information via social media as long as it is in compliance with Regulation FD and investors have been alerted about which social media will be used to disseminate such information.
“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.”
Neither Chief Executive Hastings nor Netflix incurred any penalties.
For the complete text of the SEC announcement, go to: http://www.sec.gov/news/press/2013/2013-51.htm