The SEC seldom releases an investigation report under Rule 21(a) of the Exchange Act, but when it does, the information is usually important for all public companies. Last week, the SEC issued an investigation report to clarify that its Regulation FD guidance given in 2008, directed mainly towards disclosure on company websites, is the standard to use for communications made through social media.1 The investigation report was triggered by the SEC’s investigation into whether Netflix and its CEO violated Regulation FD when the CEO posted on his personal Facebook page that Netflix had for the first time streamed 1 billion hours of content in the month of June. During the Netflix investigation, the SEC learned that there is uncertainty concerning how Regulation FD and the SEC’s prior guidance on the use of company websites apply to the use of social media. The SEC’s investigation report aims to address this uncertainty and provide guidance on how to apply the SEC’s rules to disclosures made through social media channels. Although the SEC makes clear that its report “is not aimed at inhibiting corporate communication through evolving social media,” at the same time it seeks to “remind” issuers that disclosures made through social media must still be analyzed for Regulation FD compliance.
Regulation FD Overview -
The SEC’s investigation report makes clear that, for public companies, the broadcast of information through social media is affected by Regulation FD. When the SEC released Regulation FD in 2000, its goal was to address concerns about companies selectively disclosing material information. Although Twitter and Facebook did not exist when the rule was finalized, they have grown to the point where companies may feel that posting announcements through an account with one of these services is an appropriate method for distributing information to the public.
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