There’s a new way to legally release announcements – social media. The Securities and Exchange Commission ruled on Tuesday, April 2nd, that so long as investors are made aware of where and how such data will be released, social media platforms are acceptable.
Why this became an issue originated last year when Netflix’s CEO Reed Hastings announced via his Facebook that users had watched over 1 billion hours of video in a single month. This was in grinding against Regulation Fair Disclosure, which states that information disclosed by publicly traded companies much be available to all shareholders at the same time. Since Hastings released the information from his Facebook account, and consequently Netflix’s stock rose, the argument went that all stakeholders may not have had access to that information. Hence the clause stating that investors must be made aware of how information will be released.
The SEC did state that releases should be limited to company profiles, since they often have higher visibility than personal pages, which makes Hastings’ announcement via his own profile still in the grey area. However, as the Wall Street Journal noted, Hastings’ page had roughly 200,000 subscribers at the time. More than likely, more people saw the announcement on Facebook than would have had Netflix submitted a traditional SEC filing. Hastings was not charged.
The change reflects the shifting paradigm around social media. It’s no longer simply a way to engage with other people, but a viable method for announcements usually sent out in press releases. Social media has already evolved to include methods for generating ROI through the variety of platforms, so this ruling seems an obvious step in its evolution. The SEC likened a company’s social media presence to that company’s homepage, imbuing social media with the reputation of trust inherent to reading something on a company’s official website.
So I went right to thinking about the recent Twitter hacks, Burger King being the most notable, then quickly realized they’re of no consequence. If a company is hacked and theretofore unknown information released, then the dissemination of that information via social media would have virtually no different effect than were the front page of their website defaced: Either way, it’d end up on social media.
It’s nice to see the SEC forced to catch-up to the times. Now, if only they’d hurry up with those crowdfunding regulation (they’re moving!).