S.E.C. Gives Executives Guidelines on New Media ; Agency's Modified Rules Might Reduce Disclosures over Social Networks

By Michael J De La Merced | International Herald Tribune, April 4, 2013 | Go to article overview

S.E.C. Gives Executives Guidelines on New Media ; Agency's Modified Rules Might Reduce Disclosures over Social Networks


Michael J De La Merced, International Herald Tribune


U.S. companies can now use social media sites to disclose corporate information. The regulation change followed an investigation into a Facebook post by the chief executive of Netflix.

Chief executives can now feel free to post, blog or tweet -- as long as they inform investors about their social media strategies first.

The U.S. Securities and Exchange Commission outlined new disclosure rules Tuesday that clarify how companies can use Facebook, Twitter and other social networks to disseminate information, provided they meet certain requirements. Still, the new rules may reduce spontaneity because companies may limit their communications to official corporate accounts and file the information with the agency at the same time.

With the decision, the S.E.C is playing catch-up to the new era of social media.

In December, the regulator warned Netflix that it could take action against the company for a 43-word message that the company's chief executive, Reed Hastings, posted in his personal Facebook feed. In the note, Mr. Hastings congratulated his team for exceeding one billion hours of video watched in a single month.

The agency raised concerns that the post violated Regulation Fair Disclosure, commonly known as Reg FD, which requires a company to publish material information to all investors at the same time. While Mr. Hastings's announcement was made on his publicly available Facebook page, which had more than 200,000 followers, the information was not subsequently disclosed in a securities filing or news release.

At the time, Mr. Hastings and Netflix said that his message was both immaterial and readily available to investors, having been picked up by a number of blogs and news media outlets. "We use blogging and social media, including Facebook, to communicate effectively with the public and our members," Mr. Hastings wrote -- on his Facebook page, naturally -- after disclosing the investigation last year.

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 it clear which Twitter feeds or Facebook pages will serve as potential outlets for announcements. …

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