SEC OKs material disclosures on Facebook, Twitter

Following an inquiry, the regulatory commission clears Reed Hastings and Netflix of wrongdoing, and says companies can distribute news on investor-aware accounts.

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The Securities and Exchange Commission confirmed today that public companies can announce key information on social media sites such as Facebook and Twitter, so long as investors are informed as to which accounts may publish news.

The acknowledgment was published in the SEC's report of investigation on Netflix, and makes room for social media disclosures to be in compliance with Regulation Fair Disclosure (Regulation FD), a rule that requires companies to distribute material information to investors and the general public non-exclusively. In essence, companies and their executives can reveal news on investor-aware accounts without fear of retribution.

"Companies should review the Commission's existing guidance -- it is flexible enough to address questions that arise for companies that choose to communicate through social media, and the guidance does so in a straightforward manner," Lona Nallengara, acting director of the SEC's Division of Corporation Finance, said in a statement.

The report was published following an inquiry into a regulatory faux pas committed by Netflix CEO Reed Hastings last year. In July, the executive first told his subscribers on Facebook that Netflix streamed more than 1 billion hours in a single month. The first-time reveal was made through a personally operated social media account, which means investors may not have known to look for it.

The SEC said today it did not allege wrongdoing by Hastings or Netflix, and that it will not pursue an enforcement action against the company or its CEO. Today's report is meant to clarify "market uncertainty about the application of Regulation FD to social media," the commission said.

"The report of investigation explains 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," according to a press release today.

The short and sweet of it is this: public companies can break news on Facebook or Twitter accounts if, and only if, investors are notified about the accounts ahead of time.

So next time, Hastings, just let your know investors where to look for your news.

 

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