It took the SEC over 15 years to decide that corporations could use the internet to disclose information. When it came to social media, however, the SEC has moved a bit faster. As the WSJ reported this am:
In a ruling that portends changes to how companies communicate with investors, the Securities and Exchange Commission said Tuesday that postings on sites such as Facebook and Twitter are just as good as news releases and company websites as long as the companies have told investors which outlets they intend to use.
The move was sparked by an investigation into a July Facebook posting from Netflix Inc. Chief Executive Reed Hastings, who boasted on the social-media site that the streaming-video company had exceeded one billion hours in a month for the first time, sending the firm's shares higher. The SEC opened the investigation in December to determine if the post had violated rules that bar companies from selectively disclosing information. ...
In its Tuesday ruling, the agency said social-media sites would also suffice—in some circumstances. It blessed sites as long as companies make clear to investors they plan to use them. It also suggested a corporate executive's personal Facebook page wasn't as likely as a company's social-media page to be a channel through which companies would be allowed to make important announcements. ...
Joseph Grundfest, a former member of the commission who now teaches at Stanford Law School, said the SEC is bowing to reality in blessing social media. Twitter, where users can post comments of 140 characters or less, says more than 200 million people world-wide use the service at least twice a month. Facebook says it has more than one billion users. "As a practical matter, Reed Hastings' personal Web page probably informed more people more quickly of the information than" a formal SEC filing, said Mr. Grundfest, who published a paper in January urging the SEC not to pursue an enforcement action against Mr. Hastings. "You don't have 200,000 people a day checking Netflix filings on" the SEC's electronic-document site.
The SEC announcement is here. Highlights:
The SEC’s report of investigation confirms that Regulation FD applies to social media and other emerging means of communication used by public companies the same way it applies to company websites. The SEC issued guidance in 2008 clarifying that websites can serve as an effective means for disseminating information to investors if they’ve been made aware that’s where to look for it. Today’s report clarifies that company communications made through social media channels could constitute selective disclosures and, therefore, require careful Regulation FD analysis. ...
Regulation FD requires companies to distribute material information in a manner reasonably designed to get that information out to the general public broadly and non-exclusively. It is intended to ensure that all investors have the ability to gain access to material information at the same time.
Blogosphere commentary includes Usha Rodrigues:
This move seems easy and right-- unless the SEC wants to play little Dutch boy. There seems to be no stopping social media.
Next question: how broadly will companies authorize social media disclosure? Dealbook's Michael J. de la Merced observes that "the new move may reduce spontaneity because companies may limit their communications to official corporate accounts and file the information with the agency at the same time."
Even though the SEC's press release touts the new report as a greenlight for companies - the press release's title is "SEC Says Social Media OK for Company Announcements If Investors Are Alerted" - I'm dubious that companies and their advisors will see it that way. For starters, the new guidance comes from an Enforcement report (here's an explanation of what a Section 21(a) report is) - perhaps not the best vehicle to encourage new practices. [Not surprisingly, many mass media reporters were fooled by the SEC's title and report that the SEC has "new" disclosure rules.]
And it doesn't get into the nitty gritty like IM's new guidance does. Given the slow adoption rate of social media by IR, finance and governance professionals - compared to the rest of the world - I'm not convinced this will be enough to get folks moving (for example, see this blog by Blank Rome's Yelena Barychev; this blog by Leonard Street's Steve Quinlivan and this Cooley news brief from Cydney Posner).
Both make excellent points.
