SEC Issues Guidance on Use of Social Media

Corporate Attorney Daniele Ouellette LevyBy: Daniele Levy

Yesterday the Securities and Exchange Commission (SEC) issued guidance to clarify how public companies and executives may use social media to disseminate company information in compliance with Reg. FD. Reg. FD was adopted in 2000 to prohibit selective disclosure of material non-public information by public companies. Reg. FD provides that when a public company discloses material non-public information to securities analysts or stockholders it must also simultaneously disclose such information through a recognized channel of distribution in order to achieve broad distribution of the information.

The SEC has stated that it encourages the use of electronic communications to disseminate information and promote transparency in the trading markets. In its guidance on the use of social media, the SEC emphasized two points. First, company communications – whether from the company or its executives – distributed through social media channels require a careful Reg. FD analysis. Second, in order to meet the requirements of Reg. FD a company must alert the investing public in advance of the social media channels it intends to use to communicate company information.

Action Items: Public companies should consider (1) adopting a policy identifying the social media channels the company and its executives intend to use to disseminate material information regarding the company, and (2) disclosing such channels on their corporate website in order to give the investing public the ability to take action in order to receive such disclosures.

For more information on this topic, please contact Daniele Levy.

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