What the Securities and Exchange Commission Thinks About Social Media

May 16, 2013 - PRLog -- The Securities and Exchange Commission (SEC), which has cited “uncertainty” as the reason for its years-long ambivalence over the use of social media, has finally clarified what will be allowed in terms of financial disclosures published on social media after having its hand forced by Reed Hastings, the CEO of Netflix. The issue that necessitated some kind of ruling from the SEC on the use of social media came about in July 2012 when Mr. Hastings posted on his personal Facebook page that Netflix had reached 1 billion hours of monthly streaming for the first time.

While it’s entirely possible that the post by Mr. Hastings was born out of excitement about reaching a lofty benchmark, the SEC saw it as a material financial disclosure and opened an investigation focused on the potential violation of fair disclosure rules because the news wasn’t released via “traditional” channels such as a press release or a formal filing with the SEC. After four months of investigation and deliberation, the SEC announced that social media sites could be used as channels for the distribution of financial disclosures as long as companies provide advance notification to investors of the platforms where material news will be released.

Whether the ruling means that social media is now considered as a traditional channel for the release of financial information is unclear. What is clear, however, is that social media platforms are continuing to be integrated into a widening variety of communication formats between businesses, their customers, and their investors.    

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