Corporate Disclosure: The Twitter Effect

A better understanding of the SEC's recently issued Web site guidance is necessary to formal and informal corporate disclosure in the new media world

On May 7, 2009, the New York Stock Exchange implemented new rules allowing for the use of corporate Web sites as a primary vehicle for disseminating material company information. Coming several years after the Nasdaq Stock Market made a similar change, the NYSE's amended Immediate Release Policy no longer requires -- but continues to encourage -- NYSE-listed companies to use press releases as the primary means of distributing material information. With certain restrictions and conditions, companies may instead disclose such information to investors via any Regulation FD-compliant method, which may include the use of corporate Web sites and other advanced communications technologies.

The move has been widely seen as needed and as an inevitable nod to the emergence of the Internet as one of today's main communications tools for both businesses and individuals. The new rules also follow on the heels of guidance issued by the Securities and Exchange Commission in 2008, on how company Web sites can serve as a primary means of public communication without violating the SEC's general antifraud rule, Rule 10b-5, or Regulation FD.[FOOTNOTE 1] Rather than changing SEC regulations, the Web site guidance is considered to be an updated interpretation of existing law as it applies to the risks and opportunities inherent in these emerging technologies.

However, just as new rules have been promulgated regarding formal corporate disclosures, there has been a concurrent rise in the use of social networking tools -- such as Twitter, Facebook, LinkedIn, personal and corporate blogs and other sites and technologies -- for the sharing of informal corporate and personal information, ranging from advertising campaigns to question-and-answer sessions with investors and "inside looks" at company events. When these communication methodologies form a part of a company's general corporate communications, marketing or investor-relations practices, or are potentially perceived by the public and investors as a formal part of a company's practices, even when initiated by individual employees and executives, questions are raised as to whether information is being disclosed in violation of Regulation FD.

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Source: law.com
By: Stephen E. Older