SEC Allows Use of Social Media to Disseminate Material Information
The SEC recently declined to pursue an enforcement action against a public company for using social media to disclose material information. The SEC indicated that a public company would not violate Regulation FD (rule prohibiting selective disclosure) if it provides appropriate notice to the marketplace that it intends to use a social media outlet (e.g. Facebook) to disseminate material nonpublic information. In the case, a company’s CEO used his personal Facebook page to disclose certain material business data. Although such disclosure did not include the appropriate advance notice and should not have used the personal page for such disclosure, the Enforcement Division determined not to pursue an action because the SEC had not specifically provided guidance on the use of social media in this context.
OUR TAKE: This non-action has some relevance for the investment management industry. First, it may pave the way for the Investment Management staff to allow more freedom to advisers using social media to market their services. Second, it will make it more difficult for the buy-side to collect all relevant information, although more information may become available.