Certain rules under the securities laws require certain communications be accompanied by legends. The length of the legend meant that Twitter could not be used because the 140 character limit would be exceeded. As has long been suspected, the SEC has now blessed the use of Twitter by permitting a link to the required legend. In the past we have noted use of this technique.
It’s not quite that simple, the SEC has issued a series of CDIs (one of which can be found here) which permit the use of Twitter if the following conditions are met:
- The electronic communication is distributed through a platform that has technological limitations on the number of characters or amount of text that may be included in the communication;
- Including the required legend in its entirety, together with the other information, would cause the communication to exceed the limit on the number of characters or amount of text; and
- The communication contains an active hyperlink to the required legend and prominently conveys, through introductory language or otherwise, that important or required information is provided through the hyperlink.
Of course, the rub is in the last bullet, and what exactly must be done to prominently convey that important or required information is provided through the hyperlink? Maybe “TIIIITH” (meaning “there is important information in the hyperlink”) will become a well-known acronym like “OMG” and the SEC will bless this via a subsequent CDI.
Just because the SEC permits it doesn’t mean it is a good idea to take to Twitter for any or all purposes. It’s hard to give disclosure that complies with the securities laws in 140 character limits and the anti-fraud rules still apply.
And just as soon as an issuer tweets something it is bound to be followed by one, or a few thousand, retweets, and God only knows how many laws that could violate. After all, the retweeter may modify the text or delete the link to the required legend. The SEC has said that is not the issuer’s problem, but when reduced to regulatory speak (replace “retransmission” with “retweet”) the guidance says this:
“If the third party is neither an offering participant nor acting on behalf of the issuer or an offering participant and the issuer has no involvement in the third party’s re-transmission beyond having initially prepared and distributed the communication in compliance with either Rule 134 or Rule 433, the re-transmission would not be attributable to the issuer. As explained in Securities Act Release No. 33-8591 (July 19, 2005), “[W]hether information prepared and distributed by third parties that are not offering participants is attributable to an issuer or other offering participant depends upon whether the issuer or other offering participant has involved itself in the preparation of the information or explicitly or implicitly endorsed or approved the information.”