From Facebook to FD: SEC Releases Guidance on Use of Social Media

by Bracewell LLP
Contact

On April 2, 2013, the Division of Enforcement of the U.S. Securities and Exchange Commission released guidance on the use of social media to disseminate material, nonpublic information under Regulation FD (Fair Disclosure). Released as a Report of Investigation Pursuant to Section 21(a) of the Securities Exchange Act of 1934 regarding Netflix, Inc. and Reed Hastings, the Division concluded that, while it was not seeking to inhibit corporate communication through the use of social media channels, dissemination through such channels must be analyzed for compliance with Regulation FD and investors should be informed of which channels the company intends to utilize for such disclosures.

Regulation FD generally provides that when an issuer, or a person acting on its behalf, discloses material, nonpublic information to a group that includes certain enumerated persons, including analysts or investors, it must be made in a manner reasonably designed to provide broad, non-exclusionary distribution of the information to the public. If selective disclosure to enumerated persons is made intentionally, it must be broadcast to the public simultaneously. If selective disclosure is made unintentionally, it should be publicly broadcast promptly thereafter.

The facts behind the investigation are fairly straightforward. On July 3, 2012, Reed Hastings, CEO of Netflix, Inc., posted a statement on his personal Facebook page that Netflix’s June viewing exceeded 1 billion hours for the first time. Netflix did not issue a press release through its standard distribution channels, file a Form 8-K, or otherwise disseminate this information. This 1 billion hours represented a nearly 50% increase in streaming hours from a January 25, 2012 announcement made by Netflix in its fourth quarter financial earnings release. While Mr. Hastings’ Facebook page is accessible by the public, the company had neither before used his page to make announcements nor notified investors that his page might be used for such communications. The Division also noted that “[p]rior to his post, Hastings did not receive input from Netflix’s chief financial officer, the legal department, or investor relations department.” The online streaming and video rental company reported on a Form 8-K that Mr. Hastings received a “Wells Notice” from the SEC on December 5, 2012.

The Division decided not to pursue an enforcement action in this matter. It emphasized that all disclosures to groups that include an enumerated person should undergo a “facts-and-circumstances” analysis to determine compliance with Regulation FD. The Division also encouraged reporting companies to refer to its 2008 Guidance on the Use of Company Web Sites, which encourages issuers to consider including in periodic reports and press releases the web sites that a company utilizes to post important information and disclosing on such websites any other generally used avenues of corporation communication. In particular, the Division noted that (1) an issuer communication through social media channels requires careful Regulation FD analysis and (2) the public should be alerted to the sources that the issuer expects to use to distribute such information so that the public knows where to look for disclosures and can do whatever is required to be in a position to receive the information.

The Board and Director Utilization of Social Media Task Force of the American Bar Association met on April 4, 2013, to discuss the recent SEC guidance and the evolving landscape of the release of information. The task force intends to present this topic at the ABA’s Annual Meeting in San Francisco later this year.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Bracewell LLP | Attorney Advertising

Written by:

Bracewell LLP
Contact
more
less

Bracewell LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.