The Securities and Exchange Commission has issued a report concluding that social media, such as Facebook and Twitter, may constitute legitimate means for a reporting company to make public announcements in compliance with Regulation FD.
With certain exceptions, Regulation FD requires a reporting company or person acting on its behalf to make public disclosure of material nonpublic information at the same time that the information is being disclosed to a broker-dealer, investment adviser, investment company, or holder of the company's securities, under circumstances in which it is reasonably likely that such security holder will buy or sell company securities on the basis of the information.
Under 2008 SEC guidance, a company makes public disclosure when it distributes information "through a recognized channel of distribution." A company's website might constitute such a channel if postings on the website are "reasonably designed to provide broad non-exclusionary distribution of the information to the public," and the company has sufficiently made the public aware of the company's intention to distribute important company information via its website. Such information should be prominently disclosed at the website, in a location known and routinely used for such disclosures, in a readily accessible format.
In its recent report, the SEC advised that its analysis whether a website can be considered a suitable means of disseminating company information applies equally to other social media and reiterated that the SEC encourages companies to take advantage of technological developments to distribute information. Information might be distributed in compliance with Regulation FD on a company Facebook page, for example, if, in its periodic reports and press releases, the company informs the public that the company posts important information on its website, and the website discloses which social media channels the company intends to use. Dissemination of information on a corporate officer's personal social media site is unlikely to meet Regulation FD requirements, even if the site has a large number of followers, unless investors have been notified in advance of the intended use of the site for this purpose.
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