The SEC "Likes" Facebook; Agency Says Public Companies Can Make Disclosures Via Social Media, As Long As They First Disclose Which Social Sites They Will Use Hot

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The SEC released the results of an investigation of the CEO of Netflix, declining to file any charges against him for disclosing material nonpublic information about Netflix on his personal Facebook page last year. The agency basically says that because social media is so new, Netflix CEO Reed Hastings did not have enough guidance to punish him. But it set the record straight on how it wants public entities to use social media to disclose material information.


The embrace of social media by the SEC in the publc dislcosure process represents a major event in communications, a major policy change. The government is recognizing and legitimizing the new communication medium.


For financial advisors the change has no immediate impact, although you may want to start following your favorite companies and mutual funds if they "favorite" a particular social medium, like Faceboook or Twitter, for making public discloures about company news. 


Longer term, my guess is RIAs might be able to satisfy the annual brochure disclosure requirement using social media.


In concluding its report on the investigation, the SEC said:

"There has been a rapid proliferation of social media channels for corporate communication since the issuance of the Commission’s 2008 Guidance. An increasing number of public companies are using social media to communicate with their shareholders and the investing public. We appreciate the value and prevalence of social media channels in contemporary market communications, and the Commission supports companies seeking new ways to communicate and engage with shareholders and the market. This Report is not aimed at inhibiting corporate communication through evolving social media channels. To the contrary, we seek to remind issuers that disclosures to persons enumerated in Regulation FD, even if made through evolving social media channels, must still be analyzed for compliance with Regulation FD. Moreover, we emphasize that the Commission’s 2008 Guidance, though largely focused on the use of web sites, is equally applicable to current and evolving social media channels of corporate communication. The 2008 Guidance explained that issuers must take steps sufficient to alert investors and the market to the channels it will use for the dissemination of material, nonpublic information. We believe that adherence to this guidance will help, with minimal burden, to assure compliance with Regulation FD and the fair and efficient operation of the market."


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