The two most annoying things about the SEC – Social Media discussion are (a) the people that don’t get it, and (b) the people that say other people don’t get it.
This sometimes happens when two worlds collide. In this case, we have securities law and some practical realities of social media. I spent way too much time reading what has been written on this topic in media of all kinds. (Note please that this discussion excludes anything published on law firm websites – for so, so many reasons.) It appears that most of the writing has been done by securities lawyers or business writers. Much of that writing includes, or is based upon, an “SEC you just don’t get it” theme.
This is an interesting phenomenon. There is something about technology (and now social media) that makes some people conflate understanding of a thing and acceptance of it. In this case, some believe it is obvious that the SEC would immediately and completely accept social media if only the SEC understood it. Thus, the SEC’s complete ignorance is conclusively proven. It has gone so far as the use of the “L” word. That’s right, someone accused the SEC of having Luddite views.
Why are writers in the business and legal communities so very determined to show how much better they understand this stuff than the SEC, or than anyone else for that matter? Maybe they’re compensating for something. Probably some fifteen year old at Microcenter made them feel stupid about setting up a router for a wireless network. Maybe if we all had prom dates all wars would’ve ended years ago. But I digress.
The point to which I struggle to return, is the discussion seems too one-sided. The predictable consequence is that too much of what has been said about this matter has gone unchallenged. So, just to illustrate, let’s do some challenging.
A particularly important issue in the current debate is whether a Facebook posting is a public communication under applicable securities law. Clearly the pro social-media-for-disclosure crowd thinks so.
Take for example, Why Netflix Shouldn’t Back Down From The SEC, a particularly self-righteous screed written by Richard Levick and published by Fast Company. You can find it here:
In that article, Mr. Levick quotes Neil Eggleston of Kirkland & Ellis LLP as stating:
Thus, to say that a Facebook post to 245,000 followers breaks with Reg FD is a stretch. This is not a case of targeted dissemination and if Netflix makes that case in court, I think it will win.
A similar point is made by Benjamin Fischer in It’s Time For The SEC To Join The Digital Age. You can find it here:
In his article, Mr.Fischer says of Mr. Hastings’ Facebook post:
It was sent to his more than 200,000 individual Twitter followers and also was accessible by anyone with access to a computer, thereby affording virtually any investor with even a passing interest in Netflix’s stock performance the ability to monitor the communications of its CEO.
How many followers makes a Facebook page a public forum for these purposes? Is that determined on a raw number basis or is it a ratio of shareholders to Facebook followers?
Mr. Fischer also offers advice to the SEC. He says:
Rather than attempting to regulate these new forms of digital communication by trying to shove them into the four corners of Regulation FD, the SEC should consider embracing this technology as a means to ensure that more information is communicated to the investing public. … Thus, the SEC should consider methods whereby shareholders and analysts can elect to automatically follow a corporate officer’s Twitter feed or Facebook page. This approach will allow more people to follow a corporation’s news and disclosures, recognizes the realities of new digital methods of communication, and will foster more corporate communication with the public.
What does embrace mean in this context? We’re talking about privately owned social media, so are you advocating for the government to force Tweeter, Facebook and the like to establish a separate channel of communication for these purposes? What do you mean when you say “…consider methods whereby shareholders and analysts can elect to automatically follow a corporate officer’s Twitter feed or Facebook page.…” Details people. We need details.
I am curious about why challenges to this line of reasoning aren’t easy to find. Why is that?