Business reporters have long had to monitor Facebook, Twitter and other social media sites to stay atop of the news on the companies and executives they cover. Now the Securities and Exchange Commission is weighing in on the practice, offering some clarity for CEOs as well as reporters.
Here are some of the details from the Wall Street Journal:
Executives with itchy Twitter fingers can rest easier after federal securities regulators blessed the use of social-media sites to broadcast market-moving corporate news.
In a ruling that portends changes to how companies communicate with investors, the Securities and Exchange Commission said Tuesday that postings on sites such as Facebook and Twitter are just as good as news releases and company websites as long as the companies have told investors which outlets they intend to use.
The move was sparked by an investigation into a July Facebook posting from Netflix Inc. Chief Executive Reed Hastings, who boasted on the social-media site that the streaming-video company had exceeded one billion hours in a month for the first time, sending the firm’s shares higher. The SEC opened the investigation in December to determine if the post had violated rules that bar companies from selectively disclosing information.
“An increasing number of public companies are using social media to communicate with their shareholders and the investing public,” the SEC said in its report Tuesday. “We appreciate the value and prevalence of social media channels in contemporary market communications, and the commission supports companies seeking new ways to communicate.”
The fair-disclosure rule at issue requires companies to disseminate information in a way that wouldn’t be expected to give an advantage to one group of investors over another. The SEC has said that filing a form, known as an 8-K, or holding an earnings call are both ways to ensure compliance with the regulation.
In 2008, the SEC said that companies could use their corporate home pages, under certain circumstances, to disseminate sensitive information.
The New York Times points out that the SEC may be loosening its standards on social media.
Now, the S.E.C. seems to be relaxing its stance.
After an investigation of several months, regulators said that companies could treat social media as legitimate outlets for communication, much like corporate Web sites or the agency’s own public filing system called Edgar. The catch is that corporations have to make clear which Twitter feeds or Facebook pages will serve as potential outlets for announcements.
“They did a really good job of splitting the baby,” said Thomas A. Sporkin, a former S.E.C. enforcement official and now a partner at Buckley Sandler.
In developing its rules, the agency also let Mr. Hastings avoid sanctions for his Facebook post. Neither the chief executive nor Netflix incurred any penalties after receiving a Wells notice from the agency in December.
Instead, the regulator issued what is known as a report of investigation, used on the rare occasion when it wants to issue broad guidance from a specific investigation. As part of its release, the agency reiterated its goal for Reg FD was making sure investors received information at the same time.
“One set of shareholders should not be able to get a jump on other shareholders just because the company is selectively disclosing important information,” George S. Canellos, the agency’s acting enforcement chief, said Tuesday in a statement. “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.”
As Forbes points out, it might be a step forward, but the SEC has a ways to go.
The clarification updates existing wording, Regulation Fair Disclosure, that sanctioned corporate websites as an appropriate means to distribute information. The update will probably force links to corporate Facebook, Twitter and LinkedIn accounts to quickly appear prominently on investor-relations pages. Else businesses with tweet-happy executive could soon run afoul of regulators.
While the SEC seems intent on entering the 21st century, if at a belated pace, it still took the regulators about 20 minutes to tweet a press release about the regulatory update. So much for simultaneous disclosure.
