Monday, June 24, 2013

SEC "Likes" Social Media

To tweet or not to tweet, that is the question.

On April 2, 2013, the Securities and Exchange Commission (SEC) issued a report with respect to its investigation into whether or not Netflix, Inc. and its Chief Executive Officer, Reed Hastings, had violated SEC regulations by virtue of Mr. Hastings’ disclosure of material, non-public information about Netflix via his personal Facebook account.  The SEC reported that it had chosen not to pursue enforcement action against Netflix or Mr. Hastings, but noted that Facebook posts, Twitter tweets, and other social media postings could violate SEC disclosure rules, such as Regulation FD (Fair Disclosure), if such posts contained material non-public information.

On the other hand, the SEC report confirmed that a publicly traded company could use social media to comply with Regulation FD's requirements to distribute material information about the company so long as the investing public was given prior notice that the company planned to use such social media platform for its public disclosures of company information.  This SEC position is analytically consistent with its 2008 release approving disclosure of company information via a public company's website so long as investors were given prior notice of such disclosure method.

A more detailed description of the SEC's Netflix report and SEC regulations implicated by use of social media can be found in an article I wrote for the Dallas Bar Association's "Headnotes" magazine, which is available here.