Today the Securities and Exchange Commission (the “SEC”) issued a report of investigation under the Securities Exchange Act of 1934 providing guidance to public companies on the application of Regulation FD and SEC interpretive guidance to corporate disclosures made through social media.  The report [1] clarifies that public companies under certain circumstances may disseminate material, nonpublic information via social media in compliance with Regulation FD if investors previously have been alerted that the specific social media will be used to disseminate such information. 

The SEC report follows an inquiry by the SEC’s Division of Enforcement regarding a July 2012 post by Netflix Chief Executive Officer Reed Hastings on his personal Facebook page stating that Netflix’s monthly online viewing had exceeded one billion hours for the first time.  The report indicates that Netflix did not report this information to investors through a press release or Form 8-K filing.  Neither Mr. Hastings nor Netflix had previously used Mr. Hastings’ Facebook page to announce company metrics.  Rather, Netflix had consistently directed the public to its own Facebook page, Twitter feed, and blog and to its own web site for information about Netflix.  The SEC did not initiate an enforcement action or allege wrongdoing by Mr. Hastings or Netflix.  

The SEC report states that company communications made through social media should be examined for compliance with Regulation FD using the framework set forth in the SEC’s 2008 Commission Guidance on the Use of Company Websites (the “2008 Guidance”). [2]  “The central focus of this inquiry is whether the company has made investors, the market, and the media aware of the channels of distribution it expects to use, so these parties know where to look for disclosures of material information about the company or what they need to do to be in a position to receive this information.”

The report also explains that, while every case must be evaluated on its own particular facts, the disclosure of material, nonpublic information on the personal social media site of an individual corporate officer—without advance notice to investors that the social media site may be used for such purpose—is generally unlikely to qualify as a method “reasonably designed to provide broad, non-exclusionary distribution of the information to the public” within the meaning of Regulation FD.