This post is not about securities law. It’s about privacy and the law of unintended consequences.
So the SEC released a report about public disclosures and social media. It’s here:
In it, the SEC says it’s OK for public companies to use social media to disclose what is (up to the time of disclosure) non-public information. This is subject to the condition that the public is given notice of the specific social media where disclosure will occur.
This all started when the CEO of Netflix disclosed some information on his personal Facebook page. Specifically, he said that Netflix achieved more than a billion monthly views in June 2012. That raised a whole bunch of issues that are not worth getting into for our purposes here. Let’s just agree on the following and move on:
- We don’t need to discuss whether the Netflix CEO’s statement was material non-public information.
- The basic securities law principle here is that information should be made available to everyone at the same time.
- This is a blog, and some oversimplification is a necessary evil.
In our previous post we discussed how it is becoming difficult to opt out of social media. Here we have another example. In this case, our concern is the price of receiving information about our investments. More pointedly, do you have to be on Facebook or Twitter (or whatever) to timely receive important information about your investments? If so, the price of fairness in the marketplace might be the disclosure of personal information to Twitter or Facebook (or whatever).
The SEC has not addressed the privacy issue. In fact, in an odd way, the SEC confirms its lack of attention to the privacy issue. In its report, the SEC says:
Similarly, disclosures on corporate web sites identifying the specific social media channels a company intends to use for the dissemination of material non-public information would give investors and the markets the opportunity to take the steps necessary to be in a position to receive important disclosures —e.g., subscribing, joining, registering, or reviewing that particular channel. These are some, but certainly not all, of the methods a company could use, with minimal burden, to enable evolving social media channels of corporate disclosure to be used as recognized channels of distribution in compliance with Regulation FD and the 2008 Guidance.
So it’s clear that the SEC understands there are sometimes prerequisites to participating in social media.
However, apparently the SEC has no concern about investor privacy. Instead, the SEC’s concern is whether it might be a burden on a company to inform investors about the company’s use of social media for public disclosures.
In contrast, here are a couple of examples of the kinds of questions the Federal Trade Commission might ask about this:
Should there be limits on the kind of personal information that Facebook (for example) can demand from individuals as a condition of receiving disclosure from a company?
Should a company be prohibited from receiving compensation from Facebook (for example again) in exchange for being designated as a place for that company’s disclosures?
Clearly the SEC hasn’t thought this through. Perhaps that’s because these issues are more within the purview of Federal Trade Commission. This privacy thing is a big deal over there. Maybe the two of them should talk.
We’ll have more muck-blogging about this topic next week.