The SEC recently issued a so-called “21(a) report” concerning the application of Reg FD to corporate disclosures made through social media. The report arose out of a SEC investigation into whether Netflix CEO Reed Hastings violated Reg FD by using his personal Facebook page to announce Netflix streaming metrics.
Reg FD prohibits public companies, or persons acting on their behalf, from selectively disclosing material, nonpublic information to certain securities professionals, or shareholders where it is reasonably foreseeable that they will trade on that information, before it is made available to the general public. Reg FD requires that companies and those acting on their behalf distribute the information in a manner reasonably designed to achieve effective, broad and non-exclusionary distribution to the public.
In its report, the SEC made the following two main points: First, companies must examine communications through social media for compliance with Reg FD. Second, the principles outlined in the SEC’s 2008 Reg FD guidance concerning the use of websites to disseminate corporation information apply with equal force to corporate disclosures made through social media channels. Most notably, companies must ensure that the social media channel is a “recognized channel of distribution” by alerting the market to the fact that the company will use the social media channel to disseminate corporate information.