US companies will now be allowed to post their earnings on Twitter or Facebook as long as they have told where to look into for these details on advance. On yesterday, the US Securities and Exchange Commission issued a guidance allowing the companies to use social networking sites including Twitter and Facebook for communicating the company announcements. This came as part of the report detailing as the investigation into Netflix’s Chief Executive Officer Reed Hastings was conducted. Incidentally, in last July, Hastings posted the monthly viewership details on his Facebook page, instead of making an SEC filing or a news release.
SEC has decided not to bring any sort of enforcement action against either Netflix or Hastings. Incidentally, Netflix runs a subscription service for viewing movies and television programs. According to the agency, the rules regarding usage of social media sites for company disclosures had been pretty much unclear.
The acting Director of the Enforcement Division of SEC, George Canellos, believes that most Social Medias are considered to be suitable methods when it comes to communicating with investors. However, access should not be restricted as otherwise; investors will not know how they can get all the latest news regarding a company.
According to the Securities Law Professor at the Santa Clara University’s School of Law, Stephen Diamond, social media, these days has tremendous potential when it comes to playing participants in the market. He added that this recent SEC decision shows that the commission is responsive and flexible when it comes to making amendments and it proves that this Government agency believes that innovation is actually a good thing.
The SEC stated further that the regulation which prohibits companies from disclosing material information to the selected investors still apply to social media, apart from the other emerging modes of communication. If the investor does not tell that where information on company updates will be posted, it will still be considered a violation to the rule named as Regulation FD.
Menlo Park, the spokesperson of Facebook, stated that they are happy with this acceptance of SEC that Facebook is now an established way for individuals and companies to share information in a broad manner. David Katz, who is a partner of Wachtell, stated that this is 21st century and at some point of time, the SEC had to catch up.