The document discusses the SEC's new guidance allowing public companies to use social media like Twitter and Facebook to disclose material corporate information to investors. It outlines some of the key points of the guidance, including that investors must be alerted about which social media channels will be used. While seen as progressive, the vague rules also concern some corporate executives worried about potential compliance issues. The document recommends companies follow best practices like coordinating social media disclosures with overall investor communication strategies when using these channels.

1. Tweets, Likes and Other Disclosures:
Social Media and the New Corporate Message
A LexisNexis® White Paper

2. Highlights
•
An increasing number of public companies are using social media outlets
to communicate with their shareholders and the investing public.
•
The SEC has permitted the use of social media to announce key
information in compliance with Regulation FD.
•
Investors must be alerted to the specific social media that will be used
to disseminate corporate information.
•
What might seem to be a progressive move by the federal securities
regulator is making some corporate executives and their legal
counsel nervous.
•
The SEC’s guidance was general, leaving room for error in a rush to
communicate with shareholders and potential investors who are
eager for information.
•
Public companies planning to use social media to disclose material
information should follow established best practices as part of an overall
investor relations strategy.
Introduction
Marshall McLuhan’s profound observation that “the medium is the
message” is often misunderstood. It is assumed the 20th-century
communications theorist meant that channels of mass media eventually
take precedence over the content they deliver, but that’s not the case.1
McLuhan’s notion of a medium was “any extension of ourselves,” which could
easily be a wheel or a Walkman®. The message the medium conveys is found
in “the change of scale or pace or pattern” that it introduces into human
affairs—in other words, how the medium transforms people.
In the mid-1800s, for example, the telegraph transformed the world.
By accelerating the pace at which business was conducted, the telegraph
(medium) resulted in a populace that came to expect instant gratification
in matters of discourse, regardless of distance (message).
What today’s Internet is telling us is still unclear, even if we know its message
is vastly more complex than the telegraph’s.2 Indeed, that message will likely
be at least as far-reaching as the medium itself. And social media are
increasingly a part of whatever story is unfolding—as Corporate America is
about to discover in ways it probably could have never imagined.
A Brave New World
In April 2013, the Securities and Exchange Commission (SEC) cleared public
companies3 to use social media outlets such as Twitter® and Facebook® to
announce key information in compliance with Regulation Fair Disclosure
(Regulation FD), “so long as investors have been alerted about which social
media will be used to disseminate such information.”
Regulation FD requires companies to distribute material information in a
manner reasonably designed to get that information out to the general public
broadly and non-exclusively. It is intended to ensure that all investors have
the ability to gain access to material information at the same time.
“An increasing number of public companies are using social media to
communicate with their shareholders and the investing public,” the SEC
noted. “We appreciate the value and prevalence of social media channels in
contemporary market communications, and the commission supports
companies seeking new ways to communicate.”
In effect, the SEC recognized that it, too, cannot ignore the growth and power
of social media, and it responded by laying out some ground rules. Reacting to
the new guidance, the global investment banking and securities firm Goldman
Sachs turned to its Twitter account (twitter.com/goldmansachs) and
tweeted “thanks” to the SEC. It was a sentiment that many in the business
community shared.
But what might seem to many to be a progressive move is actually making
some other companies nervous. For one thing, the SEC’s guidance was
general, leaving room for error. Some executives may be rightfully worried
about those in their organizations with “itchy Twitter fingers,” while balancing
a desire to communicate with shareholders and potential investors who are
eager for information.
Tweets, Likes and Other Disclosures: Social Media and the New Corporate Message

3. Testing the Waters
Best Practices for the Social Era
In fact, the move to allow social media as a channel for delivering company
information was prompted by an SEC investigation into a Facebook posting by
Netflix® founder and CEO Reed Hastings.4 In July 2012, Hastings had boasted on
his personal page within the social media site that his company had exceeded
one billion viewing hours in a month for the first time. The posting was quickly
picked up by others and redistributed through various online publications and
content aggregators. As a result, the company’s share prices rose.
Indeed, social media are essential channels in today’s world, and there is good
reason to act prudently when using them to announce financial and other key
information to investors. For example, on the same day it issued a quarterly
earnings report in early 2013, PepsiCo Inc. sent out more than a half-dozen
messages from its official Twitter account (twitter.com/pepsico) and included
snippets from profit numbers and dividend payouts as well as comments from
the company’s CEO. However, those details were included in a traditional
earnings news release issued earlier in the day and the tweets included links to
the original document.
Such tactics are a good start for public companies planning to use social
media to disclose material information. Some law firms, such as Philadelphiabased Pepper Hamilton LLP (pepperlaw.com) recommend other best
practices. A commentary posted on the firm’s corporate website shortly after
the SEC guidance was released includes several key “Pepper Points” that are
particularly instructive.5 For example:
•
“Disclosure on designated social media outlets should be coordinated as
part of a company’s overall investor communication strategy.”
•
Such disclosures should be “subject to the same rigorous constraints
and procedures as disclosures through other public means such as press
releases or earnings conference calls.”
•
“Officers, directors and employees should be cautioned against
disclosing any confidential company information...other than through
approved channels and procedures.”
Netflix CEO Reed Hastings’ July 2012 Facebook post.
At the time, the commission indicated that Netflix and its CEO seemed to be
acting in a manner that was at odds with the fair-disclosure rules. They hadn’t
previously used Hastings’ personal page to announce important company
information; moreover, they had not alerted the public that the site could be
used for that purpose. Hastings argued that with more than 200,000
followers, his personal page was very much a “public forum,” where it could
be reasonably expected he might share Netflix-related details.
With the April 2013 ruling, the commission cleared Hastings of any
wrongdoing and said it wouldn’t pursue civil charges in the matter.
A spokesman for Netflix said afterwards, in a tone that mixed determination
with diplomacy, that the CEO “views social media as an important method
of communication and, consistent with the SEC’s guidance in this area,
will continue to do so.”
Those practices, and others like them, will help shape “the message” that
will come from corporate use of social media as a platform for dialogue
with shareholders and others. What that message will be is anyone’s guess
at this point.
But the medium is there now. All that remains is to see what is done with it
and find its hidden meaning.
That will happen—with time.
Tweets, Likes and Other Disclosures: Social Media and the New Corporate Message

4. The Solution for Legal Professionals
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and analysis of critical developments, and insight and guidance from leading
securities practitioners, LexisNexis® Securities Solutions help litigators and
transactional attorneys find and access the information they need to handle
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visit www.thisisreallaw.com.
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warrant this document is complete or error-free. If written by a third party, the opinions may not represent the opinions of LexisNexis.
1
Mark Federman, “What is the Meaning of The Medium is the
Message?” McLuhan Program in Culture and Technology,
University of Toronto, http://individual.utoronto.ca/markfederman/
article_mediumisthemessage.htm.
3
U.S. Securities and Exchange Commission, “SEC Says Social
Media OK for Company Announcements if Investors Are
Alerted,” April 2, 2013, http://www.sec.gov/News/PressRelease/
Detail/PressRelease/1365171513574#.UqYWk2RARD8.
2
Tom Standage, The Victorian Internet: The Remarkable Story of
the Telegraph and the Nineteenth Century’s On-line Pioneers,
http://www.amazon.com/The-Victorian-Internet-RemarkableNineteenth/dp/0802716040.
4
Netflix, Officers and Directors, http://ir.netflix.com/management.
cfm.
5
Robert A. Friedel and Andrew D. Kupchik, “Corporate and
Securities Law Alert: Social Media Use by Public Companies – The SEC Weighs In,” Pepper Hamilton LLP, April
4, 2013, http://www.pepperlaw.com/publications_update.
aspx?ArticleKey=2602.
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