As reported in The Wall Street Journal today, Netflix, Inc., has filed documents with the Securities and Exchange Commission (“SEC”) stating its intent to disclose “material information” on its corporate Twitter feed, Facebook page, and blog, as well as the Facebook page of its CEO. The Los Gatos-based company will continue to file traditional disclosures, regarding important company information, but the filing is a first for any publicly-traded company and will likely not be the last.
How quickly other organizations adopt Netflix’s example will be dependent upon an internal assessment of risk for potentially running afoul against decades-old rules that are designed to protect consumers and investors from fraudulent activities. The SEC has signaled an unwillingness to update years of regulatory legislation, in response to new technology, out of fear that doing so would create a slippery slope of deceptive or “puffed” disclosures/activities. Frustrated by this unwillingness, many financial industry and Wall Street firms are trying to seek guidance on how to apply social-media disclosures to antiquated regulatory requirements.
An example of this frustration is whether a third-party’s use of the “like” button on a financial services company Facebook page, or endorsing an advisor’s skills on LinkedIn, could be viewed as an improper testimonial defined under applicable regulations. Such an act, could potentially subject the company, and/or individual, to penalties and jail time. Financial services firms seek relief from these regulatory bans that prohibit testimonials in advertisements, but the SEC considers them to be “inherently misleading,” and suggests they get pre-clearance before posting on social media sites.
Therefore, while the SEC seems to have acknowledged the presence of social media in our daily routines, it still remains skeptical on how it is going to be applied in our everyday world and will leave it up to the organizations to police themselves. In this regard, a proper assessment of social-media use within an organization is an emerging talking point across most boardrooms in America.