On April 2, 2013 the SEC released guidance relating to the use of social media sites to disclose material non-public information in compliance with Regulation FD of the Securities Exchange Act of 1934, which requires that when an issuer, or a person acting on its behalf, discloses material, nonpublic information to securities market professionals or shareholders where it is reasonably foreseeable that they will trade on the basis of the information, it must distribute that information to the general public.1 In connection with its Report of Investigation of Netflix, Inc. and Reed Hastings, the SEC advised that while compliance with Regulation FD "is always a facts-and-circumstances analysis based on the specific context presented,"2 the use of social media such as facebook and Twitter to disclose material nonpublic information would constitute a method "reasonably designed to provide broad, non-exclusionary distribution of the information to the public,"3 as long as the company provided adequate notice to investors and the general public as to its use of such media. However, if access to the medium or website would require a membership or password, which gave selective access, such medium would not be compliant.
The SEC previously provided guidance in 2008, explaining that for purposes of complying with Regulation FD, a company makes public disclosure when it distributes information "through a recognized channel of distribution."4 The SEC reiterated that it does not intend to reduce the number of channels that are used to disseminate information to the public, but only to ensure that the public is adequately informed as to which channels are being used. Thus, if a company disclosed on its website or public filings that it will use facebook, Twitter or other social media to distribute material nonpublic information and provided clear instructions as to how to access such information, such social media channels would be available to use to comply with Regulation FD.
This guidance was provided in connection with an investigation of Netflix, Inc. and its CEO who posted a message containing information regarding the number of viewed hours of Netflix content for the month of June 2012 on his personal facebook page. Ultimately, the SEC chose not to pursue charges against Mr. Hastings or Netflix.