Earlier this week, the Securities and Exchange Commission (SEC) gave companies the OK to disseminate key information on social media channels, acknowledging the widespread adoption of social media as a form of communication.
In a press release dated April 2, the SEC clarified that companies can use social networks like Facebook or Twitter as long as they disclose to investors what networks they will be communicating on:
“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.
This is not the first time the SEC has had to adapt to the digital frontier, nor is it the last. In 2008, the SEC was faced with the challenge of modernizing regulations on the Securities and Exchange Act to better guide company's who wish to disseminate company information on the Internet.
In response to the emergence of companies using websites as a primary source of communication, the SEC states it “long recognized the vital role of the Internet and electronic communications in modernizing the disclosure system under the federal securities laws and in promoting transparency, liquidity and efficiency in our trading markets.”
Foreshadowing that society would soon outgrow the technology of 2008, the SEC made their guidance adaptive, providing issuers a framework for regulation as opposed to a static regulation.
Message posted by Hastings, Netflix CEO in July 2012
The most recent cry for change came after Netflix CEO Reed Hastings posted information about the viewership on Netflix on his personal Facebook Page. The post boasted that monthly viewing had exceeded 1 billion hours, prompting BTIG analyst Richard Richard Greenfield to deem Netflix the most-watched TV channel.
Following this announcement, Netflix shares surged, leading some to argue that the use of social media could result in an unfair advantage if regulations were not in place.
While the SEC initially suggested bringing charges against Hastings for violating fair disclosure laws, it decided against pursuing legal action and instead made it clear that social media is, in fact, an acceptable channel for corporate information to be distributed.
This is a bold statement from the SEC, signaling that news from social media is no longer secondary to news from website.
Joining the ranks of company websites, social media has earned its legitimacy in the eyes of the SEC. Applying the same regulations on social media posts as they do on website posts, the SEC requires that companies make clear what social media outlets their investors can expect to see used, and announcements must be accompanied by a press release.
"The fact that they actually came out and made a pretty clear-cut statement that social media is an acceptable means for public companies to communicate, that is significant for the investor-relations industry," Jeff Corbin, chief executive at KCSA Strategic Communications, told the Wall Street Journal.
Just as social media has earned its place in politics, law enforcement, conflict resolution, and the Olympics, it has now been recognized as a key factor in company relations with investors, further indicating that social media is here to stay.