Will Investors “Like” the New SEC Social Media Ruling?

Will Investors “Like” the New SEC Social Media Ruling?

A Facebook post from Netflix Chief Executive Reed Hastings sparked a recent SEC investigation into how companies communicate with their investors. The agency ruled that postings on social media outlets such as Facebook and Twitter are sufficient means for disseminating important information such as news releases and earnings announcements as long as the company informs their investors which social media outlets they intend to use.

In the Facebook post in question, Mr. Hastings revealed (on his personal Facebook page) that Netflix had exceeded one billion hours of streaming-content in one month for the first time ever. This announcement lead to a jump in the companies share value leading some investors to question whether or not disclosing this type of message on Facebook violated SEC rules prohibiting companies from selectively disclosing information. In the official report filed by the SEC on April 2, 2013, the agency stated, “An increasing number of public companies are using social media to communicate with their shareholders and the investing public. We appreciate the value and prevalence of social media channels in contemporary market communications and the Commission supports companies seeking new ways to communicate and engage with shareholders and the market.” The fair-disclosure rule cited in the SEC report requires that companies disclose information in a way that provides everyone an equal advantage to its content. The ruling contended that a company Facebook page or Twitter page could be an appropriate portal for important announcements but questioned whether or not this would apply to personal social media pages and accounts such as Mr. Hastings.

While many companies currently use social media in one form or another, it is less common to find companies that use it to communicate important business and financial information. Will investors be forced to start “following” or “liking” the companies in which they hold a financial stake in order to maintain a competitive advantage?

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