Following an investigation sparked by Netflix CEO Reed Hastings’ announcement that Netflix subscribers had passed the 1 billion hours viewed milestone, the SEC today announced that in specific circumstances, it can be okay to announce key company information and stats on social media channels like Facebook and Twitter. The one caveat they stipulate is that investors must be primed to watch those channels by companies if information is being released there first.
The major issue at question was whether or not Hastings had violated Regulation Fair Disclosure (Regulation FD), which stipulates that companies must distribute info material to their financial success in a way designed to make sure it’s available as broadly and “non-exclusively” as possible. Hastings had publicly defended his actions, once again via Facebook, saying that since his reach is over 200,000 on Facebook, including reporters and bloggers, the company considered it a public channel. Plus, Hastings added, they didn’t really consider this particular milestone material to their business, since they’d announced via their blog that they were approaching that total anyways.
The SEC’s report today agrees that social media channels are public, but those belonging to an individual corporate officer are unlikely to fall under the category of an acceptable means of conveying previously unreleased information material to a company’s bottom line is not okay, unless investors are told in advance to look for it there. The SEC puts it like this in a summary of its findings:
The report of investigation explains that although every case must be evaluated on its own facts, disclosure of material, nonpublic information on the personal social media site of an individual corporate officer — without advance notice to investors that the site may be used for this purpose — is unlikely to qualify as an acceptable method of disclosure under the securities laws. Personal social media sites of individuals employed by a public company would not ordinarily be assumed to be channels through which the company would disclose material corporate information.
Note that neither Netflix or Hastings are actually facing any kind of punishment for the original FB announcement; the SEC was just using it as a jumping off point to look into how social media might be used with respect to Regulation FD, since it recognized that there’s not much clarity around that issue as of yet.
The area of social media and its role in the business news cycle remains one that not only the SEC, but also companies like Marketwire (now rebranded as Marketwired and with a new key social analytics focus) are only beginning to adapt to. This new report comes as a reaction to real-world changing circumstances, but don’t expect it to be the last word, especially now that some kind of guidance has been issued which companies could potentially run afoul of.