DraftKings, SEC Settle Over Selective Disclosure Charges

The SEC settled charges against DraftKings Inc. for the selective disclosure of material non-public information (MNPI) via the CEO’s personal social media accounts, violating Regulation FD. According to an article by BCLP Law, the disclosure pertained to ongoing sales growth, shared before public release of financial results. 

Although the posts were deleted shortly after the company’s request, the SEC found DraftKings at fault for not promptly disclosing the information per Regulation FD requirements. Consequently, DraftKings agreed to a $200,000 civil penalty and to provide its communications staff with training on Regulation FD.

Regulation FD, aimed at preventing selective disclosure, requires that any unintentionally disclosed MNPI be promptly made public, typically within 24 hours. The SEC has consistently enforced this regulation over the last 20 years, emphasizing the need for companies to maintain robust communication and disclosure protocols.

To mitigate compliance risks, the article suggests public companies should routinely train employees on Regulation FD and social media policies, review and strengthen internal controls for disclosures, and provide advance notice to investors about social media platforms to be used for significant announcements, aligning with SEC guidance.

DraftKings’ case highlights the importance of adhering to both Regulation FD and company policies, which prohibit the disclosure of MNPI via social media without prior approval. The SEC’s action reminds companies that violations can lead to significant penalties and emphasizes the necessity of being vigilant in their compliance efforts.