SEC: Social Networks Are Safe Place to Make Corporate Disclosures

netflix, social media, social networks, regulation, SECThe Securities and Exchange Commission has given the green light for companies to use social networks instead of press releases to disclose business information as long as investors have been notified which network will be used.

The ruling clarifies confusion about how communications over social media were affected by Regulation FD, which requires companies to make disclosures about their performance in a publicly available format. It stems specifically from an investigation into an announcement Netflix CEO Reed Hastings made on Facebook in June. Hastings said that Netflix users were watching almost a billion hours of video per month on the site.

The SEC confirmed with the decision that Regulation FD applies to social media just as it applies to company websites. The commission okayed in 2008 the use of a designated spot on a company website as a means of disseminating information to investors. Regulation FD ensures that company executives of public companies don’t share information with some investors and not others.

“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,” said George Canellos, acting director of the SEC’s Division of Enforcement.

The decision does not validate Hastings’s actions, however. Because Netflix had not previously used its company Facebook page to announce business performance, Hastings still runs afoul of disclosure rules as they were clarified today. But the commission said it will not take action against the Netflix CEO.

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