SEC clarifies how social media can be used for corporate disclosures
Given the social media available today – such as twitter or Facebook – information can be easily distributed to millions of people in a matter of just seconds. Sadly for corporate executives, having these social media tools at their fingertips has created a whole new set of problems when it comes to disseminating information to shareholders and potential investors.
In the already heavily-regulated corporate world – where even the slightest misstatement or mistake in disclose can lead to allegations of securities fraud – corporate executives need to be careful as to how they inform the public of company information, including disclosures on social media.
Fortunately, the Securities and Exchange Commission (SEC) recently announced that chief corporate executives are free to blog or post key company information over social media outlets as long as investors have been told about which form of social media will be utilized by the company.
SEC social media determination
In recent years it has become increasingly murky for executives about what company information they are permitted to post on social media. According to a SEC press release, one particular company CEO recently came under fire for publishing some company information through a Facebook post, even though the same information had not been made available through a SEC filing or company press release. SEC officials became concerned that disclosures such as this may violate Regulation Fair Disclosure (Regulation FD).
Specifically, the purpose of Regulation FD – which prohibits senior company officials from privately disclosing any material nonpublic information regarding the company to limited people – is to prevent selective disclosure of company information and ensure that the information is nonexclusively distributed to the general public. The idea is that all investors should have the ability to access the information at the same time.
George Canellos, who is the Acting Director of the SEC’s Division of Enforcement, was quoted in the recent SEC press release as saying, “Most social media are perfectly suitable methods for communicating with investors, but not if the access is restricted or if investors don’t know that’s where they need to turn to get the latest news.”
Ultimately, the SEC determined that companies are permitted to disclose corporate information on social media, albeit with one catch: companies have to make it clear which social media outlets will be used to disseminate the information.
Help with constantly-changing SEC regulations
The recent SEC social media determination illustrates just how complicated the world of securities compliance can be – consisting of countless ever-changing rules and regulations. Consequently, if you are a corporate officer or director and happen to be facing an investigation regarding allegations of securities fraud, it is important to speak with an experienced securities fraud defense attorney who can assist in ensuring your rights are protected.