SEC likes company updates on Facebook

Commission endorses use of social media to post results but advance notice needed

PUBLISHED : Thursday, 04 April, 2013, 12:00am
UPDATED : Thursday, 04 April, 2013, 3:35am


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Companies in the United States will be able to post their earnings on Twitter or update their status on Facebook as long as investors have been told in advance where to look.

The US Securities and Exchange Commission issued guidance on Tuesday permitting companies to use social media sites, including Facebook and Twitter, to communicate company announcements.

The guidance came as part of a report detailing its investigation into Netflix chief executive Reed Hastings, who posted in July monthly viewership results on his Facebook page rather than in a commission filing or news release.

The commission said it refrained from bringing an enforcement action against Hastings or Netflix, which runs a subscription service for watching television programmes and movies, because rules about using social media for company disclosures had been unclear.

"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," said George Canellos, acting director of the commission's enforcement division.

The commission confirmed that a regulation prohibiting firms from disclosing material information to select investors applies to social media and other emerging means of communication the same way it applies to company websites.

Company communications made through social media channels could constitute a violation of the fair disclosure rule known as Regulation FD if investors had not been told in advance where the information would be posted, the commission said.

Social media "has tremendous potential to level the playing field for participants in the markets", said Stephen Diamond, a securities law professor at Santa Clara University's School of Law.

The report "shows a commission that's being flexible and responsive, and it shows a government agency that actually thinks innovation is a good thing".

Gene Goldman, a partner at law firm McDermott Will & Emery, said the report provided firms with a road map for staying out of trouble.

"But the next time material information is disclosed on an executive's Facebook page without the company alerting all shareholders to look there for information, the matter will likely be met with an SEC lawsuit instead of a report," Goldman said.