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SEC Issues Report on Social Media Dissemination of Information

On July 3, 2012, Netflix CEO, Reed Hastings, possibly violated Reg FD when Hastings posted corporate information on his personal Facebook. However, on April 2, 2013, the SEC decided not to initiate an enforcement action or allege wrongdoing by Hastings or Netflix. The SEC recognized that there has been market uncertainty about the application of Regulation FD to social media.

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.

The SEC has reported in the past that the fair disclosure rule “applies to social media and other emerging means of communication used by public companies the same way it applies to company websites.” In 2008, the SEC approved the use of websites to disseminate corporate information, if investors have been told to monitor the sites for announcements.

The SEC report concluded that companies are permitted to utilize social media outlets to announce key information in compliance with Regulation FD, so long as investors have been alerted about which social media will be used to disseminate such information.

However, the SEC noted that every case must be evaluated on its own facts, but “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.”