The SEC stated that disclosing material nonpublic information on the personal social media site of an individual corporate officer, without advance notice to investors that the site may be used for this purpose, is unlikely to satisfy Regulation FD because it is not likely a method “reasonably designed to provide broad, non-exclusionary distribution of the information to the public” that Reg FD requires.
The SEC stated this is true even if “the individual in question has a large number of subscribers, friends or other social media contacts, so that the information is likely to reach a broader audience over time.” The SEC used its 2013 guidance to highlight the concept that whether a Regulation FD violation occurred will turn on whether the investing public was alerted to the channels of distribution a company will use to disseminate material information.
Justin Slane, Sharon Makower and Joe Green are editors for the Capital Markets & Corporate Governance Service at Thomson Reuters Practical Law. (Tesla) and its CEO and now former chairman of the board, Elon Musk.
Musk’s tweets are also an extreme, yet useful, example of why casual social media use and disclosure of material nonpublic information should not be mixed.
Section 10(b) of the Exchange Act prohibits material misstatements and omissions of fact, and companies must always avoid making disclosures in informal social media posts that lack material information or the context necessary for investors to be fully informed.