Companies Can Now ‘Friend’ Investors

Netflix CEO won't be penalized for Facebook post

Companies can now "friend" their investors to communicate market-moving news. Facebook and other social media platforms were cleared by the Securities and Exchange Commission to announce key information as long as the companies let investors know where to find that information first.

The report, issued Tuesday, stemmed from an investigation into the activities of Netflix CEO Reed Hastings, who last July posted on his personal Facebook page that the company's monthly online viewing had exceeded 1 billion hours for the first time. Netflix did not report the information to investors in a press release or Form 8-K filing, raising questions about whether the company violated the Regulation Fair Disclosure Rule.

The SEC did not sanction Hastings but clarified that personal social media channels of individuals employed by a company may not be assumed to be an official channel to disclose corporate information.

"One set of shareholders should not be able to get a jump on other shareholders just because the company is selectively disclosing important information," George Canellos, acting director of the SEC's division of enforcement, said in a statement. "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."

Tuesday's report builds on the SEC's 2008 guidance that noted a number of new channels companies can use for distributing material information to the marketplace, including websites, email alerts and blogs—as long as the channels are broadly recognized by investors and the public as communications channels.