Evolving Social Networks Pose Corporate Disclosure Questions

Lora Bentley

In recent days we've said a lot at IT Business Edge about the Federal Trade Commission's recently published guides on advertising and social media. Ann All jumped on the story back in June, when the guidelines were mere proposals. But as new as various forms of social media are, the FTC is not the first or the only federal agency to regulate how they may be used.


The Securities and Exchange Commission addressed material disclosures made on company Web sites -- and by extension company blogs, Facebook pages and Twitter accounts -- last year when it released guidance on how to use Web sites as a primary means of disseminating information to the public.


Law.com writer Stephen E. Older, a partner in the law firm of McDermott, Will & Emery, explains that the SEC's guidance on Web site communications has four parts. The first addresses public disclosure requirements under Regulation FD. The second addresses the liability structure for statements published on a company Web site. The third discusses the need for online disclosure procedures, but clarifies that the same disclosure controls that apply to official SEC filings are not always necessary with disclosures made on company Web sites. Finally, the guidance details the acceptable formats for publishing information online. (One acceptable format, for instance, is eXtensible Business Reporting Language, which the SEC has called "the future of financial filing.")


However, because the social media platforms are also used to communicate informally, questions remain whether those informal communications can violate Regulation FD. Older describes a recent situation involving an employee's posts to a company Twitter account during an earnings call and questions regarding which, if any, of those posts constituted disclosures that would be subject to SEC rules. According to The Wall Street Journal:

Corporate lawyers say companies should devise a social-media policy before adopting blogs or Twitter. "All of the traditional ways that a company can get in trouble for making public statements" apply to the Web, says Lisa Wood, of Foley Hoag. She urges companies to include the standard disclaimers they use in other communications. Ms. Wood says companies shouldn't disclose financial information on Twitter that isn't available elsewhere.

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