KMK Law Corporate & Securities Blog

So apparently, Netflix is good for something other than just House of Cards.  In an eagerly-awaiting ruling Wednesday, the SEC issued a report confirming that companies are permitted to disseminate material information through their social media channels in compliance with Regulation Fair Disclosure (“Regulation FD”) so long as investors know that companies are going to do so.

The issue originally arose when the SEC slapped Netflix CEO Reed Hastings last July for posting on the Netflix Facebook page (and only at this location) that his customers were now consuming more than 1 billion hours of content per month.  The SEC interpreted this comment as the dissemination of material, non-public information which, under Regulation FD, would need to be disclosed either in an 8-K filing or, as companies typically do it, through an official press release posted to the company website. 

In its Wednesday report, the SEC confirmed what we’ve assumed the last 9 months – that a company’s social media channel is the Web 2.0-equivalent of a static company webpage for Regulation FD purposes.  The only condition the SEC placed on social media is that investors need to be made aware by the company – prior to the disclosure – that the company intends to use a social media channel (and which specific channel, e.g., Twitter, Facebook, etc.) for the purpose of disseminating material, non-public information, whether in the form of a press release or simply a tweet.

Good to see the SEC catching up here.  After all, they’ve had a Twitter account for some time.  But this may have the unintended consequence of turning Facebook “corporate” if companies elect to use it in lieu of 8-K filings.  While this will undoubtedly increase Facebook’s ad revenue, it may cut into Mr. Zuckerberg’s street cred a bit.  I’m guessing he’ll be ok with that…