SEC Regulation Fair Disclosure.
In August of 2000, the Security and Exchange Commission (SEC) announced a rule that publicly traded companies must divulge material information to all investors at the same time. In other words, the information cannot be released to only certain investors and cannot be released piecemeal. The rule is referred to as SEC Regulation Fair Disclosure or the Regulation FD.
Since the implementation of SEC Regulation FD in 2000, much has changed, particularly the advent of Social Media venues e.g., Twitter and Facebook.
Netflix Gets it Wrong on Facebook.
In July of 2012 Netflix CEO Reed Hastings announced on his Facebook page figures on the company’s monthly viewership for the previous month, stating that “Netflix monthly viewing exceeded 1 billion hours for the first time ever in June.” The seemingly innocent post on the growing success of Netflix has landed Mr. Hastings in hot water with the SEC.
The SEC is not only looking into whether Netflix allegedly violated Regulation FD, but whether they also violated 10b-5. Section 10b-5 deals with deceit and fraud in the selling or purchasing of securities, and is more commonly known as the insider trading statute.
The argument in defense of Netflix is that Facebook is indeed a public company, and therefore, there was no intent to hide information from certain investors or to favor others. Mr. Hastings has over 200,000 subscribers to his Facebook account.
In the past, the SEC has stated that a website or blog could be considered “public” in regards to Regulation FD as long as the website is recognized as a venue for distribution of information – if investors know to look for it there.
This case, once again, highlights the effects that the social media boom is having on businesses, small and large. Taking advantage of the benefits while avoiding the pitfalls can be challenging, to say the least.
Until next time, I’m Attorney Francine Ward helping you protect what’s yours. Feel free to join my conversation on my Law Facebook Fan Page, my Twitter Law Page, or in one of my LinkedIn Groups.