Cue dramatic music . . .
Last week, the SEC announced that companies can use social media to release key information. This had been described to me as a groundbreaking move for company disclosure. Then I read the release.
Last year, the SEC sent a Wells Notice to Reed Hastings, CEO of Netflix, stating that he violated a bunch of 34 Act statutes and regulations, including Regulation FD, for making some statements on his Facebook page about Netflix’ user metrics.
The SEC accepted the fact that it is a grey area about whether or how to use social media to release material nonpublic information. The SEC continued to say that you could do it without violating a bunch of laws and regs if you don’t restrict access and if you tell people where to look for it.
So, has the SEC finally discovered the Inter-tubes and embraced the future?
No. This is the same analysis they have been providing for years. As they said in their release about the use of company websites in 2008 [Ed.: I can’t believe it has been that long.]:
“Through the years, we have taken a number of steps to encourage the dissemination of information electronically via the Internet, as we believe that widespread access to company information is a key component of our integrated disclosure scheme, the efficient functioning of the markets, and investor protection.”
When doing the analysis of website posting for Reg FD purposes, the SEC has said that:
“Thus, in evaluating whether information is public for purposes of our guidance, companies must consider whether and when: (1) a company web site is a recognized channel of distribution, (2) posting of information on a company web site disseminates the information in a manner making it available to the securities marketplace in general, and (3) there has been a reasonable waiting period for investors and the market to react to the posted information.” [Ed.: Emphasis added.]
In other words, there is nothing new here. Would the market expect to see financial or performance metrics on a Facebook page? Is registration or subscription required? Are you effectively making a public or limited release of the information?
I interpret the new SEC release to be as much of a warning as it was “permission.” Money quote:
“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.”
From one of the greatest movies of all time:
Fletch: Can’t do that, Frank. Fat Sam isn’t the story, there’s a source behind him.
Frank Walker: Who?
Fletch: Well, there we’re in kind of a grey area.
Frank Walker: How grey?