KCSA PUBLIC RELATIONS, INVESTOR RELATIONS BLOG

A Step Forward By the SEC on Public Company Disclosure and Social Media

Posted by on May 7th, 2014

Just a couple of weeks ago, the SEC provided clarity on how public companies can use social media for purposes of disclosure and satisfying Regulation Fair Disclosure (Reg FD).

In early April of 2013, the SEC shook up the Investor Relation industry when it stated, and The Wall Street Journal reported on its front page that the “SEC Embraces Social Media.”  At that time, I applauded the SEC’s move and willingness to embrace 21st Century technology as a means of communicating (click here to read my blog post from April 3, 2013).  I also suggested that the SEC provide additional clarity and guidance on the issue since the IR industry, of which I have been a part of for more than 15 years, is hesitant to embrace change, especially when it has to do with disclosure related issues.

In celebration of the one year anniversary of the above, a couple of weeks ago, the SEC took an additional step forward in helping us to better understand how public companies can use social media, particularly Twitter, in their communications without having to worry about violating Reg FD.  At its essence, the SEC said in its Compliance and Disclosure Interpretation of Sections that to the extent a communication is limited by the number of characters or amount of text that can be included (i.e. Twitter’s limit is 140 characters), so long as “an active hyperlink” is included in the communications, Reg FD will be satisfied.

For those not familiar with Twitter or well-versed in social media lingo, the following tweet is an example (that I made up) that demonstrates what would be considered acceptable by the SEC:

Today, Alibaba filed with the U.S. Securities & Exchange Commission for an IPO.  http://1.usa.gov/1mBTb5V

The statement above is less than 140 characters in length.  It contains an active, shortened hyperlink (truncated through online service Bitly) to the following web page that can be found in the SEC’s EDGAR database:

https://www.sec.gov/Archives/edgar/data/1577552/000119312514184994/0001193125-14-184994-index.htm

As I said more than a year ago, we shouldn’t look a gift horse in the mouth.  Progress is definitely being made.  Nevertheless, I want to reiterate my thoughts on IR/social media best practices.  In addition its recent interpretation, the SEC should provide additional guidance so that public companies feel even more comfortable embracing social media in their IR communications:

  • Step 1:  Publicly disclose each of the means by which a company intends to communicate (both socially and traditionally) in its annual report on Form 10-K.
  • Step 2:  For the dissemination of all material information, file a Form 8-K and post the material information to the investor section of the company’s corporate website.
  • Step 3:  In addition to Step 2, use all of the means disclosed in Step 1 every time material news is disseminated.

As we all probably know by now, social media is here to stay.  As more and more investors and individuals utilize it in their everyday communications, it is important to embrace the way in which these individuals now consume information.  The above three steps are a logical way to embrace the moment, and, at the same time, ensure compliance with regulations from the past.