This is a Guest Post by Christian Hollingsworth
The Securities and Exchange Commission (SEC) has recently announced that companies are allowed to use social media sites to reveal important information concerning the way the company is run.
The only caveat is that they are required to inform their investors about where they can find this information before making it public. Part of the reason why this rule was implemented is because in 2012, Reed Hastings, Chief Executive of Netflix, found himself in hot water with the SEC. He used his personal Facebook profile to tell others that Netflix was responsible for streaming over 1 billion hours of TV shows, movies and documentaries during June of that year.
According to the SEC, Hastings’s actions were a violation of their rule that information must be shown to the public as opposed to being shown only to a group of the company’s shareholders.
The reason for this is that it gives an unfair advantage to the shareholders who were made privy to the information while other possible investors were left in the dark. After this incident, Netflix was made fun of for not being able to keep up with the new developments in technology. This incident served to make the SEC more aware that people were confused as to the relationship between the fair disclosure act and social media websites. Due to the confusion over the rules, SEC ultimately chose not to pursue a lawsuit against Netflix.
The SEC stated that before this incident, Hastings had never been guilty of sharing company news on his Facebook page. Netflix had failed to let investors know that Hastings might use his Facebook page to share company news.
This situation led to the SEC announcing that in the future, if an incident like this were to happen again, they would sue the involved parties.
What are your thoughts on social media rules and regulations? Is it needed? Should it be allowed? What other rules should be enforced?
Photo by Enric Martinez
