SEC warns firms to be cautious about disclosing information over social media
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The U.S. Securities and Exchange Commission and the Federal Trade Commission are among the federal agencies that pay particular attention to businesses' use of social media.
The SEC warned against selectively using social media to disclose information in April 2013, a warning that came in response to a post by Reed Hastings, CEO of Los Gatos, Calif.-based Netflix Inc., on his personal Facebook page making the first announcement that Netflix's monthly online viewing had exceeded 1 billion hours.
The SEC, however, took no action against Netflix, saying it recognized there had been market uncertainty about the use of social media to disclose corporate information and said it is allowed so long as investors have been alerted about which social media will be used to disseminate such information.
“Companies need to be very cautious with respect to the way they disclose information,” said Stephen Bonnington, London-based senior vice president at Lockton Cos. L.L.P. Social media should be a complementary strategy, not a replacement for traditional announcements such as news releases or SEC filings, he said.
When it comes to the FTC, companies “have to be thoughtful about the alignment of their corporate values and strategies and mission statements with what might be disseminated via social media,” said Catherine A. Mulligan, New York-based senior vice president and head of specialty errors and omissions at Zurich North America.
Anything that might violate the Children's Online Privacy Protection Act is another concern, said Anthony Dagostino, Jersey City, N.J.-based vice president of Ace Professional Risk, a unit of Ace USA.
“Companies that are using social media that may be directed at children really have to make sure they're abiding by that (law), because the FTC has been heavily enforcing” it, Mr. Dagostino said.
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