Going public made more public

A new ruling across the pond means companies can use social media more openly, within reason

Going public made more public

Social media junkies look set to be treated to a daily fix of company results after a ruling by the Securities and Exchange Commission (SEC) in the United States.

In a move that suggests the old guard is starting to get itself in tune with the hip modern age, publicly-listed companies have been given licence to announce key information on Facebook and Twitter, so long as investors know which site will be used to disseminate the info.

It comes after the SEC’s division of enforcement launched an inquiry into a post by Netflix CEO Reed Hastings on his personal Facebook page stating that the website’s monthly online viewing had exceeded one billion hours for the first time.

The SEC did not initiate an enforcement action or allege wrongdoing by Hastings or Netflix.

The SEC’s new report of investigation confirms that Regulation Fair Disclosure (Regulation FD) applies to social media and other emerging means of communication used by public companies the same way it applies to company websites. 

It 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. 

The report clarified that company communications made through social media channels could constitute selective disclosures and, therefore, would still 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.

“One set of shareholders should not be able to get a jump on other shareholders just because the company is selectively disclosing important information,” said George Canellos, acting director of the SEC’s division of enforcement. 

“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.”

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Adam Pescod
Adam Pescod

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