SEC's blessing is a big -- if belated -- admission that social networks have become an important part of doing business.
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Lots of people have gotten into hot water for saying too much on social media, and company executives have had to be particularly sensitive about regulatory boundaries on social channels.
That is still the case, but a new report by the Securities and Exchange Commission brings information dissemination rules more into the 21st century by acknowledging the role social plays in company communications.
At the heart of the issue is a case in which Netflix CEO Reed Hastings last July announced some news on Facebook. He posted on the social network that Netflix had streamed 1 billion hours of movies and TV shows in a single month. The trouble was, Netflix hadn't reported this info in an SEC filing or through other, more traditional means. The Facebook post sent Netflix shares up while raising SEC hackles.
On Tuesday, the SEC backed down, saying that companies and company executives can use social networks such as Facebook and Twitter to disseminate news.
All of this revolves around the SEC's rules about the fair disclosure of information. The idea is that companies shouldn't provide "market-moving" information to only a select few people. The SEC's determination that social media is on par with press releases or company websites for providing organization-related news makes sense, and is also a pretty big, if belated, social business proof point.
"The SEC's report of investigation confirms that Regulation FD [Fair Disclosure] applies to social media and other emerging means of communication used by public companies the same way it applies to company websites," the SEC said in a statement. "The SEC issued guidance in 2008 clarifying that websites can serve as an effective means for disseminating information to investors if they've been made aware that's where to look for it. Today's report clarifies that company communications made through social media channels could constitute selective disclosures and, therefore, require careful Regulation FD analysis."
In other words, companies can use social media to make announcements, but they have to be sure to tell people where to get information.
"Most social media are perfectly suitable methods for communicating with investors, but not if the access is restricted or if investors don't know that's where they need to turn to get the latest news," George Canellos, acting director of the SEC's division of enforcement, said in a statement.
Do you think the SEC made the right move? Are social networks the right place for companies to be posting news? Is the audience big enough? Will this make the audience bigger? Leave a comment below.