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SEC Permits Social Media Use for Corporate Disclosure: Is Social Media the Right Fit for Your Investor Relations Program?
April 4, 2013
On April 2, 2013, the U.S. Securities and Exchange Commission (SEC) issued a press release stating that public companies may use corporate social media outlets such as Facebook and Twitter to announce key information in compliance with Regulation Fair Disclosure (Regulation FD) so long as investors have been alerted about which social media will be used to disseminate such information.
The SEC’s report stems from an inquiry the Division of Enforcement launched into a post by Netflix CEO Reed Hastings on his personal Facebook page. In the post, Hastings stated that Netflix’s monthly online viewing had exceeded one billion hours for the first time. Netflix did not report this information to investors through a press release or Form 8-K filing, and a subsequent company press release later that day did not include this information.
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. Traditionally, this has included press releases, email communication and website disclosure to ensure that all investors get the same information at the same time.
Public companies are increasingly using social media to communicate with shareholders and investors. Before companies start tweeting, certain procedures need to take place if a company plans to regularly use its social media channels as a way to disclose material, nonpublic information.
In light of this information, public companies need to take precautions when using social media to disclose material information to shareholders. We recommend the following steps to take if a public company plans to use social media as part of its communication to investors:
- Know where your audience is. Are your investors and shareholders on social media? Are your company analysts following you on social media? If your shareholders are of an older age demographic, they might not be on social media, and therefore can’t access your information from that medium. From reports we have seen, the majority of analysts are not actively following companies on social media yet. Think about who your audience is first.
- If you do decide to use your company Facebook and Twitter to disclose material information, you have to communicate to investors and shareholders in advance that those will be recognized channels of distribution. In other words, public companies need to issue a press release and communicate on their websites to investors, the market, shareholders and the media the channels of distribution they expect to use. It is important that these parties know where to look for disclosure of material information and know how to receive this information (like a Facebook page, follow a Twitter account, etc.).
- Counsel with your legal, PR/IR and executive management teams. If social media is to be used as a disclosure channel, guidelines and procedures should be established for consistency and accuracy of posting material information.
- Public companies shouldn’t rely on social media as the only means to disclose material information; it should be part of the overall communication toolbox. Many public companies want their news on Yahoo Finance, the AP, Dow Jones, Bloomberg, Reuters and other financial outlets. Posting news to only a Facebook and Twitter account WILL NOT guarantee news will get to these financial outlets. For that reason, we recommend that public companies continue to disseminate disclosure releases through Business Wire or another wire service and that social medial be considered as an additional outlet, but not the only one.
- Nonpublic information on a 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 a method “reasonably designed to provide broad, non-exclusionary distribution of the information to the public.”
At Vollrath Associates, we specialize in investor relations. If you have any questions about the SEC’s new guidance and how it could fit into your company’s investor relations program, please contact us – we’re here to help!