Crafting a Social Media Policy, with the SEC in Mind

Recently the SEC released guidance permitting companies to disclose important information to investors over social media, as long as the company identifies that platform in advance. The announcement followed a controversy in which the SEC notified Netflix and CEO Reed Hastings that it was recommending an enforcement action for disclosure of important information in a non-public manner. The action was based on a status update to Hastings’ Facebook page.

In the Guidance the SEC announced it would not pursue the Netflix enforcement action, and it clarified portions of the agency’s position on social media. Companies may use social media in certain pre-approved situations to disclose information regulated by securities laws, but the limits of this approval highlight an ongoing enforcement risk for companies: unauthorized disclosure of regulated company information on unapproved social media platforms. The recent guidance authorizes an officially sanctioned personal account as an avenue for disclosure of regulated company information.

The authors provide a list of elements a company should include in a model social media policy, based on precedent and guidance relating to the Foreign Corrupt Practices Act, some leading corporate social media policies already written, and common sense. A good social media policy should be dynamic, changing regularly as the nature of the risks change. The SEC’s significant shift in position between its 2012 notification of enforcement and 2013 April Guidance demonstrates that there is uncertainty, even among regulators, as to the proper use of social media.