The SEC's Rules and Regulations on Social Media Use

Social media is both a benefit and a nuisance for public companies. On one hand, websites such as Facebook and Twitter offer a free, quick, and easy way to promote services, raise interest, and build rapport with the public. On the other, these platforms increase the risk that an employee or executive could trigger unwanted attention from the U.S. Securities and Exchange Commission (SEC).

The eagerness of employees and executives to share opinions on social media has led many investors to wonder where the securities regulator draws the line. Learn more about rules the SEC has made for social media use by publicly traded companies.

Key Takeaways

  • The SEC was slow to provide guidance on how companies and executives can use social media.
  • Publicly traded companies can publish earnings and other material information on social media, provided that investors know to expect it there.
  • Companies, employees, and executives must also be careful when liking or sharing a post, publishing a link from a third party, or friending certain individuals.
  • Social media posts must be accompanied by additional disclosures or cautionary statements when necessary.

Regulation Fair Disclosure

One of the most important things to be aware of is Regulation Fair Disclosure, or Reg FD for short. This law prohibits selective disclosure by public companies to market professionals and certain shareholders.

Reg FD was initially rolled out in 2000 to ensure everyone has access to material nonpublic information that affects share prices. The law, principally designed to level the playing field between individual and institutional investors, states that if such a selective disclosure is made, the company must quickly or simultaneously make that information available to the rest of the public.

Internet and Social Media

In the 2000s, the internet exploded, and social media platforms became a quick way to reach a vast audience. Companies were encouraged by marketing strategists to create social media profiles to reach more customers. As more businesses created a presence on these platforms, it became apparent that Reg FD needed an update.

In 2008, with the internet age in full swing, the SEC issued new guidance stating that information could be distributed on websites provided that shareholders, investors, and the market as a whole were aware that it was the company's "recognized channel of distribution."

Companies that publish nonpublic material information on social media must ensure that investors and the broader market are aware that it will appear on the platform beforehand.

This clarification arrived after it was revealed via a Facebook post that Netflix, Inc. (NFLX) viewers had consumed one billion viewing hours in a month. This Facebook page hadn't previously disclosed performance statistics, and investors were not informed that this channel would be used to divulge potentially important company-related information in the future. Netflix also failed to immediately report the same progress report to everyone else through a press release or Form 8-K filing.


A company can also get into trouble if notable employees like or share posts, publish links from third parties, or become platform friends with specific individuals. Any of these actions can be viewed as an official endorsement or a means to indirectly convey material information.

For example, befriending a securities research analyst could potentially imply that the individual is privy to more information than peers about the company. Alternatively, sharing a link to an article insinuates that its content reflects the company's view, which can be particularly dangerous if that same article is later changed and ends up misleading investors.

Regulation FD generally applies to directors and senior executives, investor relations and public relations officers, or other agents or employees in regular communication with investors and market professionals.

Legal Disclaimers

The SEC generally requires certain company-related information to be accompanied by additional disclosures or cautionary statements.

The legal team ensures this information is included when company news is unveiled in press releases. Social media has complicated this process, increasing the chance of information being shared with the world without undergoing a vetting process to ensure it contains all the necessary disclaimers.

Character limits on some websites can also pose an issue here. When there are limits on how much can be written, the boring fine print tends to get omitted.

Public Offerings

Companies in the process of going public or issuing new shares need to be particularly careful about what they say on social media. This is because the SEC has indicated that statements made through electronic means can be construed as written offers.

What Is the SEC Regulation Regarding Fair Disclosure?

Regulation Fair Disclosure, or Reg FD for short, is designed to ensure that material information related to a company is made available to everyone simultaneously. Should information be released accidentally to a select few people, everyone else should be informed immediately afterward via the company's main communication channels.

What Is 8-K Reg FD Disclosure?

Public companies file Form 8-K to notify their shareholders and the SEC of an unscheduled material event.

What Is the SEC Marketing Rule?

The SEC's marketing rule determines how financial advisors can advertise their services. Recently, advisors were permitted to use testimonials and reviews in their marketing. However, they still cannot ask clients to write reviews for their social media pages, pay for positive reviews, or edit or hide negative reviews.

The Bottom Line

The SEC is gradually clarifying how companies and their tweet-happy executives can use social media. Over the past years, the regulator has made it clear that existing security regulations also apply to these platforms and issued guidance in instances where further clarification was required.

Perhaps the biggest issue is how the law is enforced. Fines and other punishments tend to be modest and haven't always been sufficient to discourage wealthy executives from flouting the rules.

Article Sources
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  1. U.S. Securities and Exchange Commission. "Final Rule: Selective Disclosure and Insider Trading."

  2. U.S. Securities and Exchange Commission. "Securities and Exchange Act of 1934 Release No. 69279 / April 2, 2013."

  3. U.S. Securities and Exchange Commission. "SEC Says Social Media OK for Company Announcements if Investors Are Alerted."

  4. JDSupra. "The Guide to Social Media and the Securities Laws," Pages 5 and 10.

  5. JDSupra. "The Guide to Social Media and the Securities Laws," Pages 5-6.

  6. U.S. Securities and Exchange Commission. "Shaping Company Disclosure: Remarks Before the George A. Leet Business Law Conference."

  7. JDSupra. "The Guide to Social Media and the Securities Laws," Page 12.

  8. U.S. Securities and Exchange Commission. "Fast Answers: Form 8-K."

  9. U.S. Securities and Exchange Commission. "Investment Adviser Marketing."

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