SEC Finally Says Companies Can Communicate Via Social Media

from the welcome-to-the-21st-century dept

Back in February, we wrote about the SEC's ridiculous threats against Netflix because its CEO Reed Hastings had mentioned via his personal Facebook account the fact -- already released to the public -- that Netflix users were watching nearly a billion hours of videos per month. The SEC argued that this was a material disclosure and could violate RegFD concerning "fair disclosure" of such information. The goal of RegFD is to make sure "everyone" gets access to the same material info at the same time. Of course, that's both silly and meaningless here. It's silly because there are always going to be some people who get info later than others. No one has an immediate feed into every possible news source the instant news breaks. That's life. It was also meaningless, since the info had already been released.

Thankfully, the SEC has decided not to sanction Netflix, but has decided to use the opportunity to share new rules for public companies concerning their use of social media. The SEC has caught up to about a decade ago by admitting that, yes, companies can talk about news related to themselves via social media (phew), though they have to pre-designate which of their Twitter and Facebook feeds are potential newsbreaking venues.
“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 S. Canellos, the agency’s acting enforcement chief, said Tuesday 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.”
That seems like a good rule in theory, but in practice, it still seems kind of silly. Again, news happens in lots of places -- not everyone is going to have it at the same time. Yes, it makes sense to prevent the selective leaking of info to certain investors, though it seems like insider trading rules could handle that. If we're just talking about companies putting out info, it seems pretty reasonable to assume that investors can figure out for themselves the Twitter and Facebook feeds of whatever companies they want to follow without the SEC needing to get involved.

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  1. icon
    nasch (profile), 6 Apr 2013 @ 4:01pm

    Re:

    Yeah, but if they DON'T have these rules, you know someone will try to find a loophole by "publishing" info on some Facebook or Twitter feed that almost nobody knows is related to the company.

    Exactly right. Without the rule, nothing would stop companies from having a good news account and a bad news account, and publicizing the good news one and not the bad news one.

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