Social advisors. US lawyers disagree with the financial regulator about disclosure on social media for investors, claim twitter for investors is not a format for disclosure, it is too casual.
The SEC allows websites such as Twitter and Facebook to disclose information as long as they comply with the Regulation Fair Disclosure and allow investors to know ahead of time. While companies are not likely to replace traditional disclosure channels with social media, the new guidelines will provide lawyers the chance to help companies make new policies of communicating with investors.
Others see evolving disclosure practices such as the Regulation Fair Disclosure (Reg FD). Reg FD requires investors to access the same information as quickly as possible. Traditionally, this has been done through press releases and 8-Ks. 8-Ks is a SEC form used for general disclosure like executive departures, earnings, and other important news.
The force behind the SEC guidance is Netflix Inc (@netflix). and Reed Hastings, its CEO. Last summer, Hastings posted on his personal Facebook account that the company exceeded the 1 billion monthly hours of customer viewing. So, the SEC elected to clarify the position of Hastings on social media disclosures.
The SEC established that companies should decide which medium to use and inform everyone about it. However, not everyone thought that SEC was that clear. A survey done by KCSA Strategic Communications (@kcsastrategic) after the SEC announcement found that 77% of CFOs and investors at major public companies do not think that SEC has given enough guidance on the use of social media for disclosure.
- Netflix Inc. exceeded 1 billion monthly hours of customers viewing
- 77% of CFOs and investors do not think SEC has given enough guidance
Thomas Ivey, a corporate and securities attorney with Skadden, Arps, Slate, Meagher & Flom: “It will be difficult to train investors to look beyond the usual spots for disclosure. There are practical considerations that go beyond what is technically allowed. Twitter is not a format for disclosure; it’s too casual in its content.”
Horace Nash, Chairman of the securities and corporate finance group at Fenwick & West: “The 8-K is still the gold standard for Reg FD, but I think that the standards will change. This gives us a good opportunity to help clients think about how they interact with investors. It will be happening a lot around the Valley.”
William Freeman, a securities litigator with Jones Day: “The SEC said that social media is OK, but it did not give companies carte blanche to say whatever they want. It will have to be a thoughtful, measured program. Companies will need to decide which channels they want to use and then alert everyone to those specific channels.”
Covered by my Visible Banking Team