In a ground-breaking move, the SEC has released a report in which it allows companies the use of Social Media, like Facebook and Twitter, for corporate disclosures. The move came after an investigation was launched into a disclosure by Reed Hastings, CEO of Netflix, on his personal Facebook page, that Netflix had exceeded 1 billion hours in streaming time during the month for the first time. That announcement precipitated a rise in Netflix's shares the next day. As a result, the SEC launched an investigation into whether that disclosure was in conformity with Reg FD, the groundwork rule that seeks to ensure all investors have equal access to information being disclosed.
Over the past several years, it's been a struggle for the SEC to keep up with rapid changes in the use of technology for corporate reporting - first the web, then blogs, now social media, among other things.
In this case, the investigation concluded that the use of social media would conform with Reg FD provided that companies alert investors that announcements will be coming over a particular source.
That sounds good and progressive, and it is, but it is going to create some issues both for the regulator and for investors. It's likely we will see further rules down the road in this area. Facebook, for example, provides users with a tool to post their status, and such announcements would presumably come through the status postings.However, previous status announcements quickly get buried in other postings and to find particular items requires scrolling back through everything on the site. Many investors are not going to monitor the Facebook sites of all their investments on a regular basis - along with the websites, blogs, Twitter, LinkedIn, other social media and traditional news sources. With all this richness of media, it may be that the vehicles available for investors are becoming too diverse and cumbersome. Time will tell.
For the SEC report, check out the SEC site here.
No comments:
Post a Comment