SEC clears social media for investor announcements after Netflix case

Investors will, however, have to be alerted about which social media will be used to make announcements

The U.S. Securities and Exchange Commission has cleared the use of social media such as Facebook and Twitter to announce corporate information.

Investors will, however, have to be alerted about which social media will be used to disseminate the information, the SEC said on Tuesday.

Disclosures on social media and other "emerging means of communication" comply with its Regulation Fair Disclosure (Regulation FD) as do those on websites, the commission said. In 2008, it had issued guidance that websites can be used for spreading information to investors if they have been made aware to look for the information on these sites.

The fair disclosure rule requires that companies disclose material information to the public in a broad and non-exclusive manner, so that all investors can have the ability to gain access to it 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 in a statement.

The SEC decision to allow disclosures on social media follows its inquiry into U.S. online video streaming company Netflix, after the company's CEO Reed Hastings posted numbers on viewing hours on Netflix on his personal Facebook page in July, instead of in an official release or filing to the SEC. Netflix's monthly online viewing had exceeded 1 billion hours for the first time in June, Hastings wrote on his Facebook page.

After the SEC indicated its intent to recommend action against Netflix and possibly Hastings for "violations of Regulation Fair Disclosure," the CEO said in December in another post on Facebook that he did not think the information was "material" to investors.

The SEC said on Tuesday it did not initiate action or allege wrongdoing by Hastings or Netflix, as there was market uncertainty about the application of the fair disclosure regulation to social media. The SEC, however, observed that neither Hastings nor Netflix had previously used the Facebook page to announce company data, and there were no steps taken to alert investors that Hastings' personal Facebook page might be used as a medium for communicating information about Netflix.

The SEC also made allowances for disclosures of information through the personal social media site of a corporate officer, but cautioned that it is unlikely to qualify as an acceptable method of disclosure under the securities laws without advance notice to investors that the site may be used for the purpose. "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," it added.

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John Ribeiro

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