Last December, the U.S. Securities and Exchange Commission(SEC) took issue with a chief executive officer after he used hisFacebook page to provide an update on the company's businessactivities.

Now, the SEC has decided public companies can use socialmedia like Facebook and Twitter to announce key information incompliance with Regulation Fair Disclosure (RegFD)—where investors have been previously alerted as towhich social media will be used to disseminate thisinformation.

Welcome to the 21^st Century

This change in the SEC's position comes withthe recognition that public companies are increasingly usingsocial media to communicate with stakeholders, includingshareholders. And that the ways in which companies may use thesesocial media channels are not fundamentally different from the waysin which they use web sites, blogs, and RSS feeds.

With direct and immediate communication to investors nowpossible through social media channels, such as Facebook andTwitter, the SEC expects public companies to rigorously examine thefactors indicating whether a particular channel is a “recognizedchannel of distribution” for communicating with theirinvestors.

Read Longmore's blog, including a past entry onthis topic, “SEC to Netflix: “I Am Not Your Friend (Nor aFollower),” on WillisWire HERE

Critical will be the notice given to alert the market concerningthe forms of communication the company intends to use fordisseminating material, non-public information: including thesocial media channels that may be used and the types of informationthat may be disclosed through these channel. Said the SEC release:“Without such notice, the investing public would be forced to keeppace with a changing and expanding universe of potential disclosurechannels, a virtually impossible task.”

Netflix Off the Hook

Reg FD is intended to level the playing field by prohibitingselective disclosure when it comes to information concerning publiccompanies. It provides that when a U.S. public company disclosesmaterial, nonpublic information to securities market professionalsor select shareholders–and where it is reasonably foreseeable thatthey will trade on the basis of the information—it must thendistribute this information in a manner reasonably designed toprovide effective broad and non-exclusionary distribution to thepublic.

Simultaneously with the SEC's announcement recognizing new mediaannouncements, it also disclosed its decision not topursue an enforcement action against Netflix and its CEO. Neitherhad previously used the CEO's personal Facebook page to announcecompany metrics, and the company had not previouslyinformed shareholders that his Facebook page would be used todisclose information about the firm.

But in its investigation, the SEC learned, in part from publiccommentary, that there was uncertainty concerning how Reg FD andthe SEC's earlier 2008 Guidance was to be applied to disclosuresmade through social media channels. The earlier Guidance hadexplained when it comes to complying with Reg FD a public companymakes public disclosure when it distributes information “through arecognized channel of distribution.”