SEC Releases Guidance on Social Media Disclosures

Risk Advisory/Internal Audit|Public Companies

By Dan Desko

The SEC has decided to give formal permission for companies to use social media outlets to announce important information. This announcement mandates that companies provide investors with instructions on how to access the information and they aren’t restricted from receiving it.

With the proliferation of social media outlets and their popularity as evidenced by growing user bases, questions have been arising on the appropriate use of social media to announce key financial or related information. Many believe that a Facebook post by Netflix CEO Reed Hastings in 2012 prompted the SEC into quick action for guidance. According to reports, Mr. Hastings posted Netflix viewing metrics, which were said to be at an all-time high, on his personal Facebook page and the company’s stock went from $70.45 to $81.72 that same day. The SEC has decided to not take legal action against Netflix as they cited confusion about how the fair-disclosure rules applied to social media.

With the new guidance, the SEC aims to clear up any future confusion around social media. They cite the importance of disclosure of information in accordance with Regulation FD (Fair Disclosure) and its applicability to websites and note that social media should follow the same rules. The SEC reminds organizations to carefully review all disclosures for compliance with Regulation FD.

Regulation FD’s aim is to ensure that all material disclosures of non-public information are not “selective” in nature. Organizations should be mindful when posting anything that could be interpreted as material non-public information on social media outlets alone. Organizations should carefully review social media policies and practices to ensure that there are channels for review of certain information prior to release over those outlets. In addition, organizations should consider ensuring they have procedures in place to concurrently disclosure material non-public information across multiple mediums to help ensure that no potential members of the public could be excluded from receiving the information. 

Interested in the risks of corporate social media?  Check out our Infographic, "Can Your Business Be Too  Social". 

If you have additional questions surrounding social media policy or the effect of these rulings please contact Dan Desko via email or by phone at 412-697-5562.

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This advice is not intended or written to be used for, and it cannot be used for, the purpose of avoiding any federal tax penalties that may be imposed, or for promoting, marketing or recommending to another person, any tax related matter.


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