The Securities and Exchange Commission (SEC) recently released a report outlining approval for the use of Social Media outlets, such as Facebook and Twitter for the dissemination of material non-public information by corporations, as long as certain requirements are met. However, we don't expect that this will mean very many companies immediately run out and start using social media for material disclosure.
The report began as an investigation into Netflix $NFLX after a non-sanctioned disclosure by the firm's CEO on his personal Facebook profile but is now being held up as the green light for the use of social media for investor relations.
The new SEC guidelines for material disclosure with social media are:
- Advance notice must be given to investors that the company is using Social Media outlets for dissemination of news;
- The Social Media accounts should be a corporate account and not the personal account of an officer, director or employee;
- The Chief Financial Officer (CFO), or the legal department or the Investor Relations department (at least one of them) should be consulted with prior to a disclosure for new appropriateness, and the relevant department should monitor the corporate Social Media accounts after the news has been disseminated.
The SEC based its 2013 decision on social media material disclosures on several previously published rules and regulations which are easily accessible.
#1 The Regulation Fair Disclosure (Reg. FD)
Regulation Fair Disclosure or Reg. FD (17 CFR Parts 240, 243, and 249), released in 2000, was released to stop “whisper numbers’ and other types of “selective disclosure” that was prevalent in the 90’s, particularly by the investment banking community. Reg FD directs companies to ensure that news was disseminated to the public in a broad and non-exclusionary method, primarily via news releases and SEC Form 8-K. This forms the basis for the social media disclosure ruling.
#2 Websites & Material Disclosures
The SEC updated the dissemination methods with its 2008 release regarding guidance on Corporate Websites (SEC Release No. 34-58288). The guidance acknowledged the use of Corporate Websites for the dissemination of material non-public news as long as certain criteria were met such as: the website being recognized as a channel of distribution, the website having broad distribution to the public and a reasonable amount of time having elapsed once the information has been posted.
Based on these two previous guidelines the SEC indicated, with appropriate caveats as above, that Social Media may be used as an approved method of disseminating news. In other words, public disclosure on social media is now officially ok.
We believe forward looking companies will use this opportunity to reduce IR costs and use labor more efficiently, find new investor leads and limit the effects of industry influences. The ruling removes the cost barrier to disseminating company news and lets companies take control of their own content strategy, messaging format and publication time frames.
IR Smartt specializes in providing Social Media strategies to Public Companies. By working with us, you’ll enhance executive branding, create investor leads, be fully informed of industry changes and still find time for traditional Investor Relations.
IR Smartt compliments the SEC for moving quickly on issuing guidance for Social Media news dissemination. We will have more details to follow in the next few weeks and months.
Social Disclousure Checklist
Looking to add social media to your IR program? Be sure to download our checklist for disclosure for material info.