Jeff Corbin’s Letter to the SEC

Posted by on April 23rd, 2013

April 19, 2013

Thomas Kim, Esq.
Chief Counsel
Securities and Exchange Commission
Washington, D.C. 20549

Dear Mr. Kim:

I want to thank you for your letter of February 26 responding to mine of January 23, 2013.  I wanted to follow up with respect to the SEC’s statement on April 2 embracing social media as an acceptable means of communications for publicly traded companies.  I agree wholeheartedly.

As I suggested in my previous letter, I believe further guidance on the issue of social media is required from the SEC.  With this letter, I hope to provide constructive thinking on the subject for your office to take into consideration.

As you may be aware, on April 10 and almost immediately after the SEC indicated that it would not pursue an enforcement action against Netflix, Netflix filed a Form 8-K in which it stated how it intends to disclose material information.  The company said:

[I]nvestors and others should note that we announce material financial information to our investors using our investor relations website (http://ir.netflix.com), SEC filings, press releases, public conference calls and webcasts.  We use these channels as well as social media to communicate with our subscribers and the public about our company, our services and other issues.  It is possible that the information we post on social media could be deemed to be material information.  Therefore, in light of the SEC’s guidance, we encourage investors, the media, and others interested in our company to review the information we post on the U.S. social media channels listed below. This list may be updated from time to time on Netflix’s investor relations website.

The company then went on to list the following social media channels:  The Netflix Blog, The Netflix Tech Blog, The Netflix Facebook Page, The Netflix Twitter Feed and Reed Hastings’ Public Facebook Page.

I believe that this is very concerning. To the extent that Netflix does not use all of these means of communications every time when disclosing material information, a violation of Regulation Fair Disclosure will inevitably occur.

It also raises numerous questions: does an interested party or investor now have to monitor each of the information sources specified to ensure that they know what is going on at the company that is material? Does an investor have to constantly monitor Netflix’s website to see if they changed their disclosure policy?

Not knowing Netflix’s true intent, it would appear that the answer to these questions would be yes. I don’t believe that this is what the SEC was trying to accomplish when it exonerated Netflix and condoned the use of social media in public company communications.

I also believe that this demonstrates the need for further guidance from the SEC. As an investor relations consultant for more than 15 years, I can assure you that following the SEC’s statement on April 2, public companies throughout the U.S. are now discussing and trying to figure out how to incorporate social media into their public communications so as not to violate Reg FD. It would be great if guidance could be issued to help these companies out. Social media is a great way to communicate and one that I wholeheartedly embrace. It would be a shame if companies refrained from using it simply because of the lack of clarity on how to do so for fear of violating Reg FD.

I’d like to offer four suggestions that I believe, if articulated by the SEC in updated guidance on Reg FD, will set the record straight in terms of what public companies need to do to ensure that no matter what channel they choose to communicate through, they will be in compliance with Reg FD:

1) In the company’s annual report filed on Form 10-K with the SEC, every company should clearly indicate all channels through which it intends to disclose material information. This should include traditional newswire services, social media and/or any other communications channels.
2) If a company wishes to change such channels, it shall either do so in its next Form 10-K or through the filing of an amended Form 10-K; but a company must use all communications means specified.
3) All material news announcements must be filed with a Form 8-K with the SEC.
4) All material news announcements must be posted to a company’s investor section of its corporate website. If a company does not have such a section, it must create one, as websites in general are a well-accepted repository for almost all companies’ information.

My concern with what Netflix did in its 8-K is that, without guidance incorporating some or all of the above, Netflix will now pick and choose which channel(s) they wish to communicate through. And, if other companies act in similar fashion following in Netflix’s footsteps, further problematic situations will arise. Working with many public companies in their communications, I hope this can be avoided.

I enclose a copy of my recently published book on investor relations to put this conversation into an appropriate context. I am happy to speak or meet with you or your colleagues if desired.

I look forward to hearing from you and assisting you at this important juncture in the investor relations industry.


Jeff Corbin
Chief Executive Officer