September 9, 2021
Pristine@admin
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How has RegFD evolved? SEC’s Rules On How to Use Social Media

The SEC’s RegFD (Securities Exchange Act — Regulation Fair Disclosure), which went into effect in 2000, restricts “selective disclosure.” It, therefore, enforces public businesses to make important information available through widely accessible channels. This means that RegFD allowed only press releases, EDGAR filings, and quarterly earnings calls to be publicized thirteen years ago.

However, as the corporate practices evolved, SEC RegFD also adapted to social media usage. Nevertheless, under RegFD compliance, one must be highly cautious of their sharing on social media handles. With most of the world heavily dependent on social media, it is hard for businesses to market without it.

What RegFD Allows Businesses

** Insider Exception

You are allowed selective disclosure under Regulation FD if made when the company initially collects a confidentiality agreement from the other party. It is not important for the agreement to include an undertaking to not trade on the information. However, this regulation was made to make it easier to prosecute those who receive selective information for insider trading. This is because so many times, those who owe such a duty become the subject to such prosecution.

** Venues and Social Media

The Securities and Exchange Commission (SEC) allowed companies to use social media to distribute information as long as the regulations are followed on April 2, 2013. For company websites, the investors must have full access to the company’s chosen social media platform. In addition, they must be aware of which social media platform is used to distribute their information.

** Materiality and Public Record

According to this rule, private disclosure of material information is prohibited. Therefore, the company discloses “seemingly inconsequential data,” which can be proven significant in a mosaic. The company may also inform analysts of public record information without any violation of this rule.

** Applicability

The rule applies to securities markets professionals and shareholders. The company can provide important information to business partners.

How the SEC Clarified Social Media Use and RegFD Compliance

When evaluating RegFD compliance for social media, you must keep in mind the following factors to ensure the communication is a “recognized channel of distribution: and complied with RegFD.

** Limit business-related social media use to authorized spokespersons

People use social media to distribute information related to an issuer’s business. However, this use must be restricted to specific employees and purposes authorized by the senior management of a company. The companies must know that the SEC will associate the senior executives’ statements with the company.

The National Labor Relations Board has expressed that issuers must ensure their social media policies do not chill non-managerial employees without permission. Companies can prohibit employees from disseminating non-public information under their social media policies.

Any and all information published on social media must be information that is already public or information that is being circulated equally via press release and on your website and all social media platforms at once. RegFD frowns upon people posting comments or opinions, however, if you ae recirculating a press release that has already been made public simultaneously or a news article or media publication that is already out in the public — you are doing nothing wrong.

Many companies are afraid to use any social media platforms, however as just mentioned, if you are simply recirculating information that is already out in the public, and you have previously notified the public of the whereabouts of your social media platforms (on your website for example), then you are doing nothing wrong.

** Must notify investors of sources of company information

When information is intended to be distributed to investors through social media platforms, the company should recognize those channels as its website and ensure the investors are aware through a recognized distribution channel, such as regular reports filed with the SEC or press releases.

For instance, if you are the CEO and want to post company information on your Twitter, the company must make the investors aware of the company’s website for information about their social media accounts that will be used to distribute information, including your Twitter account. It is wise to file a Form 8-K with the SEC that notes you have disclosed all such information and attach a copy to it. A good way to do this is on a regular press release, at the bottom, as a boilerplate even, simply state something like, “Please take note of our social media platforms below. We will be posting all press releases and notifications on our social media platforms as well.”

– www — http://www.pristineadvisers.com/

– Wikitia — https://wikitia.com/wiki/Patricia_Baronowski-Schneider

– youtube — https://www.youtube.com/user/PristineAdvisers/videos

– Vimeo — https://www.youtube.com/user/PristineAdvisers/videos

– LinkedIn — https://www.linkedin.com/company/1674911/admin/

– https://www.linkedin.com/in/patriciabaronowski/

– Facebook — https://www.facebook.com/PristineAdvisers?sk=wal

– Twitter — https://twitter.com/pristineadvise1

– Instagram — https://www.instagram.com/pristine_advisers/

– Blogs — https://pristineadvisers.medium.com/

As you can clearly see here — it must be documented and made public “where” you would be posting information on your social media account. We always recommend having a “Company” Facebook, LinkedIn, Twitter, Instagram, etc. and for the Company’s IR/PR Department to publicly document that you will be also posting information on them as well as on your corporate website, after having given them notice and direction of where these social media platforms can be found. Again, you are solely posting already made public information, not opinion or business news not already made public via a press release.

** Assess whether the information is material and non-public

You must consider whether you reveal through social media new information on any topic such as offerings of company securities, mergers, acquisitions, strategic transactions, important business developments, the company’s financial performance, or key executive changes. If you doubt yourself, always be on the safe side and assume the information is material.

Does the communication include new material information? Then, you must assess whether you are communicating through a recognized channel of distribution. If that is not the case, always ensure you plan to disseminate the information by recognized channels via social media.

** Utilize the “Safe Harbor” for inadvertent disclosures when necessary

If you plan to disclose material non-public information unintentionally on a selective basis through social media, you must have disclosure controls and procedures ready to immediately disclose the information through a largely distributed press release and Form 8-K.

** Keep other securities law obligations in mind

When you use social media to disclose company information, you must take into consideration the traditional securities law disclosure rules. These include identification of forward-looking statements and inclusion of significant risk factors when necessary, avoiding “entanglement” or adoption for securities law purposes by the company of third-party statements that can be linked or included in company posts, and be careful of obligations to file with the SEC the contents of social media statements during high scrutiny times.

Conclusion

It’s either use it or lose it. Once you’ve proclaimed your plan to utilize a specific channel for a particular purpose, you must use it exactly as you’ve described. Remember that inconsistent use of social media is less likely to produce the results that the SEC is looking for. It is equally non-beneficial for your company as well. Therefore, always publish consistent and proper information that has the approval of sharing. Our advice? Do as you normally do — issue press releases and filings as you always do — but in addition, after you’ve already disclosed via a press release boilerplate statement that you would also be posting the same via your social media channels — and disclosed where someone can find these channels — then you now also post the same press release, filings, news story, blog post, webinar information, corporate video, etc. onto your social media platform.

The world is online now and it is not going to be slowing down anytime soon. Your customers, shareholders, analysts, brokers, media, etc, are all online — as well as your competition. Why not simply post in there as well? Once you proclaim that you will be posting the same information that was issued as a press release, media article, or already publicly available online to your social media platforms equally, then you must do it. It will keep you out of trouble with the SEC but also keep you up to date with the modern times and in front of your prospective audiences.

Companies around the world are taking advantage of social media — even by live-tweeting their earnings calls. Using hashtags, giving pre-notice that you will be tweeting the call, even obtaining legal approval of “what” you will be tweeting [pre-approved tweets based off of earnings script for example], etc. can bring many eyes to your business, and eyes not meaning SEC eyes, but customers and investor eyes.

Wishing you continued success. If we can be of assistance, please contact us. We have 33+ years experience in the investor relations, public relations, media relations and marketing world. Let us help place YOU in front of the audience that matters MOST.

Hope this has been an insightful read.

Wishing you health and success.