“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,” the SEC has decided. Photo: AFP
Social media mavens of corporate America can breathe a little easier now.
Companies can use communications outlets like Facebook and Twitter for important announcements, so long as they alert investors to which outlets will be used, the Securities and Exchange Commission said.
The decision by the SEC follows the agency's investigation into Netflix late last year, after the online video giant's chief executive, Reed Hastings, used his personal Facebook feed to brag about the company reaching a new technical milestone.
Such was the concern over Mr Hastings message, which congratulated his team for surpassing one billion hours of video watched last June, that the SEC considered filing civil claims or seeking a cease-and-desist order against the company.
(Neither Netflix nor Mr Hastings has incurred any penalties since receiving the so-called Wells notice from the SEC.)
Behind the agency's move was a concern that the 43-word message may have violated Regulation Fair Disclosure, which requires a company to publish information material to its business to all investors at the same time. The information in Mr Hastings announcement, though made on his publicly available Facebook page, wasn't subsequently disclosed in a securities filing or proper press release.
It seems that after months of consideration, the SEC has decided that mentioning information in a Facebook post or Twitter message is as legitimate as publishing it on a corporate web site, so long as the company has already told shareholders that some information will be announced on those outlets.
"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 Canellos, the acting enforcement chief, said 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."
The SEC's decision recognises the established use of social media by companies a bit late, though the agency has taken longer to recognise newer forms of communication. It was only in 2008 that the regulator approved using corporate web sites to disclose information - nearly 14 years after the release of Netscape Navigator.
For its part, a Netflix spokesman said in a brief statement: "We appreciate the SEC's careful consideration and resolution of this matter." (The statement wasn't published to the company's Facebook or Twitter feeds, however.)
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