The SEC and Social Media – Together at Last?

Posted by Emily Lange Rodecker on April 8, 2013

SEC social media

Last week, the Securities and Exchange Commission (SEC) announced that companies would now be allowed to post news on social media profiles, provided investors were made aware of which accounts would post such notices. This came as a result of the investigation into Netflix CEO Reed Hastings, after he posted favorable company news as a status update to his Facebook page December 2012.

The SEC decided not to press charges against Hastings, though they do agree he was in the wrong to post news of Netflix success that had not been made public in any other forum to investors prior to his post. (Netflix stock jumped from $70.45 at the time of the post to $81.72 at the close of the next business day.)

Before you encourage your CEO to start posting your company’s financial reports or latest product releases to your social media channels, make sure you both fully understand all the rules and regulations surrounding social media. All posts – whether from the company’s official social media accounts, or those belonging to C-level employees – must still meet with Regulation Fair Disclosure:

“Whenever an issuer, or any person acting on its behalf, discloses any material nonpublic information regarding that issuer or its securities to [certain enumerated persons], the issuer shall make public disclosure of that information... simultaneously, in the case of an intentional disclosure; and promptly, in the case of a non-intentional disclosure.”

Why? "One set of shareholders should not be able to get a jump on other shareholders just because the company is selectively disclosing important information," acting SEC enforcement chief George Canellos explained in the report press release.

The release went on to say that “although every case must be evaluated on its own facts, disclosure of material, nonpublic information on the personal social media site of an individual corporate officer – without advance notice to investors that the site may be used for this purpose – is unlikely to qualify as an acceptable method of disclosure under the securities laws.”

After all, even if a board member or investor follows your company on Facebook or Twitter, you cannot guarantee that he or she is going to see every post that goes live. Facebook’s EdgeRank algorithm can severely impact the reach of each of your posts. Companies will likely still use traditional methods for sharing updates with investors, and use social media as a means of reiterating news updates.

To learn more about keeping compliant within the financial services world, check out our post on the FFIEC’s social media guidance and our top tips.

Topics: Business, compliance, Compliance, FFIEC, regulations, SEC

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