Posts Tagged ‘Regulation FD’

The Securities and Exchange Commission announced today that companies can use social media outlets like Facebook and Twitter to make news announcement in compliance with Regulation FD (Fair Disclosure), if investors have previously been told which social media the company will be using, and who’s feed to monitor. Regulation FD requires companies to distribute important news in a manner designed to get that information out to the general public, so that all investors have the ability to get important news at the same time. Today the SEC confirmed that social media can meet that requirement, if certain conditions are met.

The SEC commenced an investigation last year after Netflix CEO Reed Hastings posted on his personal Facebook page on July 3, 2012 that Netflix’s monthly online viewing for June 2012 had exceeded one billion hours for the first time. Netflix did not report that information to investors through a press release or Form 8-K filing, and a Netflix press release later that day did not include the information. The announcement represented a nearly 50% increase in streaming hours from Netflix’s January 25, 2012 report, and was clearly important news to the market. Hastings and Netflix had not previously used Facebook to announce company metrics, and they had never told investors to watch Hastings’ personal Facebook page for Netflix news. Netflix’s stock price increased from $70.45 at the time of the post, to $81.72 at the close of the following trading day.

According to the SEC press release: “The SEC did not initiate an enforcement action or allege wrongdoing by Hastings or Netflix. Recognizing that there has been market uncertainty about the application of Regulation FD to social media, the SEC issued the report of investigation pursuant to Section 21(a) of the Securities Exchange Act of 1934.”

The SEC’s report of investigation, available here, confirms that Regulation FD applies to social media used by public companies the same way it applies to company websites. As a result, reporting issuers cannot use social media as the sole method to report material, non-public information, unless the issuer has previously notified investors and the public to look to a specific site, page or feed for that type of information. Failure to comply could constitute selective disclosure and a violation of Regulation FD.

In particular, the report of investigation notes that the personal social media site of an individual corporate officer would not ordinarily be assumed to be a method  “reasonably designed to provide broad, non-exclusionary distribution of the information to the public” as required by Regulation FD, even if the officer is a business celebrity and has a large number of subscribers, friends or contacts.  “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”, and may not be used for that purpose unless the public is given advance notice that the site may be used to distribute company information.




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Last week the New York Stock Exchange eliminated the requirement that listed companies must file their press releases with the NYSE.  The news release requirement had been criticized over the years as being redundant to the SEC Regulation FD filing requirements, which require that each registered company disseminate material news or information by furnishing a Current Report on Form 8-K, conference calls, webcasts, press releases or other reasonable methods.  The change was affected by a filing with the SEC on April 8, 2009.  Going forward, listed companies will be in compliance with NYSE requirements if they are in compliance with the SEC Regulation FD filing requirements.

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