SEC OKs Using Social Media for Press Releases


Thanks to the Securities and Exchange Commission, it's a brave new world for investors. Now if only we can find a map.

On Tuesday, it issued a report confirming that companies may announce key information to investors via social media outlets such as Facebook or Twitter without violating the requirement of Regulation Fair Disclosure.

In recent months, companies such as Tesla and Netflix have caught flak for making what could be considered announcements of material events on social media sites such as Twitter and Facebook. Now that the SEC has given them some shelter with its officially published opinion, however, such announcements should be kosher.

The only proviso, according to the SEC, is that companies wishing to make use of social media for this purpose must have first alerted investors about where to look for the announcements. Otherwise, disclosures on social media could be deemed to constitute illegal "selective disclosures," leaving investors unaware that they've been made.

As the SEC's Acting Director of the Division of Enforcement George Canellos explained: "Most social media are perfectly suitable methods for communicating with investors, but not if the access is restricted or if investors don't know that's where they need to turn to get the latest news."

One final caveat worth noting: The SEC warned that "disclosure of material, nonpublic information on the personal social media site of an individual corporate officer -- without advance notice to investors that the site may be used for this purpose [emphasis added]" is still probably verboten. The reason: "Personal social media sites of individuals employed by a public company would not ordinarily be assumed to be channels through which the company would disclose material corporate information."

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Fool contributor Rich Smith has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Facebook, Netflix, and Tesla Motors . Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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