Regulation FD in the Social Media Age

April 11, 2013

The SEC staff’s issuance last year of a “Wells Notice” to Netflix and its CEO alleging a violation of Regulation FD based on a personal Facebook posting by the CEO called into question how the SEC would treat company disclosures made through social media under Regulation FD. Although the SEC had issued interpretative guidance in 2008 on the application of Regulation FD to company website disclosures, it had never addressed the Regulation FD implications of social media use.

On April 2, 2013, the SEC announced its decision not to proceed further in the Netflix matter and issued a report of investigation that builds on its 2008 guidance. The new guidance permits a company and its employees to use social media to report material information without violating Regulation FD, so long as two conditions are met. First, a social media channel used for this purpose must be a “recognized channel of distribution” within the meaning of the 2008 guidance. Second, the company must alert the market to the channels used and the information it may disclose using them.

The attached memo discusses the practical implications of the new guidance.