The Securities and Exchange Commission has allowed companies to use Facebook, Twitter and other social media tools to release important information, provided they release the information on the network known to customers and do it at the same time for all.
The recent development has come up in the light of an inquiry that the regulators addressed concerning personal Facebook page of Netflix’s chief executive Reed Hastings, who last year announced that the movie and TV streaming service had hit 1 billion hours viewed.
Although there was nothing in question with respect to the credibility of the announcement, the regulators wanted to check if it had violated the official guidelines about sharing important information. Since all the investors do not regularly follow Facebook pages or profiles of companies on other social networks, it seems unjustified to share information there.
However, there is no denying that the new media age has transformed businesses and now it is essential for companies to ensure their online presence and communicate with its customers through new platforms. Keeping this trend in view, the regulators have now allowed companies to use social media to share information, but on certain conditions. George Canellos, acting director of the SEC’s enforcement division, said in a statement, via Reuters:
“One set of shareholders should not be able to get a jump on other shareholders just because the company is selectively disclosing important information. 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.”
The SEC has not found the Netflix chief guilty of any charge as the guidelines of using social media were not clear at that moment. However, serious action could be taken against violations that surface in future. According to Eugene Goldman, a former SEC lawyer who is now with McDermott Will & Emery:
“The SEC is saying, ‘Here is clear Reg FD guidance about using an executive’s page. And if the information is disseminated this way again without the company alerting all shareholders to be on the look for it, we will not have a report, we’ll have an enforcement action.'”
Meanwhile, many companies including social networking sites have welcomed this decision.
Photo: TechGlobeX
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