SEC: Posting Material Information to Social Channels Is Okay, If Investors Know to Look There

Back in December of last year, Reed Hastings, the founder and CEO of Netflix made a public announcement on Facebook that Netflix subscribers had surpassed the 1 billion hours viewed milestone.  The announcement led to a SEC investigation into Mr. Hastings actions as to whether or not he violated Reg FD with the post.  Reg FD or Regulation Fair Disclosure states that publicly traded companies must distribute material information to all of their investors at the same time.

Mr. Hastings took to Facebook to defend his actions and was quick to point out his over 200,000 followers on Facebook, which includes reporters and bloggers.  He also noted that the company even announced on its blog that they were approaching milestone. Additionally, Mr. Hastings said he didn’t really consider this particular milestone material to their business.

And now the SEC has come to a decision regarding the Facebook post.  In the SEC report, they agree that social media channels are public, however, channels belonging to a corporate officer do not (typically) meet the criteria of an acceptable means of conveying previously unreleased material information, unless investors are told in advance to look for it there.

The report of investigation explains that although every case must be evaluated on its own facts, disclosure of material, nonpublic information on the personal social media site of an individual corporate officer — without advance notice to investors that the site may be used for this purpose — is unlikely to qualify as an acceptable method of disclosure under the securities laws. Personal social media sites of individuals employed by a public company would not ordinarily be assumed to be channels through which the company would disclose material corporate information.

Despite the SEC’s findings, neither Netflix or Mr. Hastings are going to receive any form of punishment for the original FB announcement. It seems that the SEC was just using it as an excuse to look into how social media might be used with respect to Reg FD, since prior to this there had not been any precedents set relating to the matter.