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Social Media and Regulated Corporate Disclosures

Tuesday, 30 April 2013

If businesses needed further proof that social media cannot be ignored, the United States Securities and Exchange Commission (“SEC”) has just confirmed it can be used to make corporate disclosures. This has direct relevance to UK investors that invest in publicly listed US companies but the implications are far wider.

The use of social media in regulated areas of business practice, as well as for marketing and communication with customers, underlines the dramatic impact social media is having on the way businesses communicate.

Fair Disclosures

The SEC recently formulated guidance on disclosure of corporate non-public information to investors and other stakeholders on social media websites, while extending the obligations under Regulation Fair Disclosure (“Regulation FD”) to such disclosures.

The guidance, which allows Companies to utilise social media such as Twitter and Facebook to make key announcements, followed an investigation into the affairs of Netflix CEO, Reed Hastings, who allegedly revealed inside information in a post on his Facebook page. The Guidance comes with significant obligations, and companies are quickly having to pick up the threads to ensure compliance.

Disseminating Material Information

Similar to most jurisdictions where shares are traded publicly, the US rules currently prohibit publicly traded Companies from disseminating material company information selectively, i.e. the information must become available to all stakeholders at the same time in the same form. To ensure this, the SEC has always maintained that any non-public information must be disclosed by the Companies through a “recognized channel of distribution”.

This seeks to ensure that Companies are able to connect with all their investors in a reasonable manner and are not being selective or discriminatory to smaller stakeholders. After the Netflix experience, the SEC saw fit to allow Companies to use social media, as it provides all information seekers a modern platform for fair and effective information from Companies.

Social Media and Disclosures

It is important to note that the rules on social media disclosures are subject to the same regulations that apply to conventional disclosures, i.e. disclosures through Company websites or press releases. Companies have an obligation to inform investors, as well as the market as a whole, that a platform is intended to be used for dissemination of information by putting up advance notices on their websites, for example.


UK based investors can be reassured that US companies following the social media route must be sure that any material information that goes out to the public is in full compliance with Regulations FD. The US is often a pioneer in the use of new technology but it remains to be seen if UK regulators will follow suit.

Generally, the use of social media by employees should be backed by strong internal policies which are reviewed regularly to take account of developments in this fast moving area. If you need assistance to ensure your social media policies and procedures are in line with best practice, Rollingsons has experienced lawyers who can assist you. For more information please contact James Crichton via e-mail or by telephone on 0207 611 4848.