SEC Guidance on Disclosure Through Social Media: Like Websites, Social Media Can Be a Regulation FD-Compliant Means of Broad Dissemination But Only If the Company Has Taken Steps to Establish It as a Recognized Channel of Distribution; Companies Using Social Media Should Remain Mindful of Antifraud and Other Regulatory Concerns

Sullivan & Cromwell LLP - April 8, 2013

On April 2, 2013, the Securities and Exchange Commission issued guidance confirming that the disclosure by public companies of material non-public information through social media channels, such as Facebook and Twitter, is governed by the principles outlined in the SEC’s 2008 guidance on website disclosure — specifically, that social media can be a Regulation FD-compliant means of broad dissemination but only if the company has taken adequate steps to alert the market that it intends to disclose such information through that channel. It is therefore important to note that if the company has not adequately alerted the market that it will disclose material information through a social media channel, then disclosure of material non-public information through that social media channel will be selective disclosure in violation of Regulation FD.

The SEC guidance explains that whether a particular form of social media is a “recognized channel of distribution” depends on the facts and circumstances, but indicates, as an example, that a company might alert the market by noting on its corporate website the specific forms of social media it intends to use and the type of information that will be disclosed.

Whether or not a company intends to use social media as a channel for distribution of material non-public information, we suggest that companies that communicate with investors and the public through social media take steps to ensure that they have in place appropriate controls and procedures. Corporate legal departments should work closely with the investor relations and public relations departments to develop and implement social media policies in light of potential liability under federal antifraud provisions and other applicable laws and regulations.