On April 2, 2013, the Securities Exchange Commission (“SEC”) issued a report confirming that companies can use social media, such as Facebook and Twitter, to make company announcements in compliance with Regulation Fair Disclosure (Regulation FD) as long as investors are alerted as to which social media outlet is being used by the company. The report was issued following an investigation into a Facebook posting made by Reed Hastings, CEO of Netflix. In the report the SEC stated that previously published guidance on the use of Company websites was applicable to the use of social media. Accordingly, a review of the SEC guidance on the use of company websites is in order.
Background
Regulation FD requires that companies take steps to ensure that material information is disclosed to the general public in a fair and fully accessible manner such that the public as a whole has simultaneous access to the information. Regulation FD is designed to ensure that all investors are on an even playing field in relation to access to material information. Regulation FD ended the era of invitation-only conference calls between company management and a select group of brokers and investment bankers, in which plans and earnings would be discussed and material information shared in advance of such information becoming public knowledge. In its report issued on April 2, 2013, the SEC confirmed that Regulation FD applies to social media in the same manner it applies to company websites.
SEC guidance on the use of company websites
The SEC issued its Commission Guidance on the Use of Company Websites, effective August 7, 2008, which guidance remains applicable today. A complete copy of the guidance is available on the SEC website and is summarized in this series of blogs, with this being Part I. In general the SEC encourages the use of company websites, and technology generally, to provide information to investors, provide analytical tools, and as a source of overall market transparency. The guidance focuses on:
(1) When information posted on a company website is “public” for purposes of the applicability of Regulation FD;
(2) Company liability for information on websites, including previously posted information; hyperlinks to third-party information; summary information and the content of interactive websites;
(3) The types of controls and procedures advisable with respect to website information; and
(4) The format of information presented with a focus on readability, not printability.
Overview of Exchange Act Rule on the Use of Company Website
As an overarching principle, the SEC recognizes company websites as a means of providing and delivering information on a scale similar to the EDGAR database. Moreover, the SEC goes so far as to confirm that the electronic delivery of information, whether through a website, the EDGAR database, electronic mail, or the like, is the preferred method above all other forms of delivering or providing information. In fact, proxy materials are required to be posted and be publicly accessible on a company website (see SEC Internet Proxy Release). The SEC further promotes the use of websites by requiring that:
- Companies disclose their website address in their annual Form 10-K’s and state whether their Exchange Act reports are available on the site (Regulation S-K Item 101(e));
- Mutual funds disclose in their prospectus whether reports are on their website and if not, provide an explanation (see Item 1(b) of Form N-1A);
- Companies make their reports available on their website as a precondition to incorporating such reports by reference in a Form S-1 or S-11 (see general instructions to Form S-1 and S-11);
- Companies post all beneficial ownership reports under Section 16 on their website (see Exchange Act section 16(a)(4(C) and Rule 16a-3(k);
- Companies post on their website notice of an intent to delist or deregister their securities (see Exchange Act Rule 12d2-2(c)(2)(iii);
- In addition, the SEC strongly suggests that XBRL interactive data be posted on a company website.
Moreover, the SEC now allows a Company to meet certain Exchange Act filing requirements by posting information on either their website or the EDGAR database. In particular,
- A company may disclose non-GAAP financial measures and Regulation G required information on its website;
- An asset-backed issuer may post disclosures of static pool data on its website;
- A company may provide its audit, nominating or compensation committee charters on its website;
- A company may disclose a material amendment to its code of ethics, or a material waiver of a provision of its code of ethics, on its website (rather than file a Form 8-K); and
- A company may provide information regarding board member attendance at the annual shareholder meeting on its website.
In Part II of this series I will address when information posted on a company website is “public” for purposes of the applicability of Regulation FD.
The Author
Attorney Laura Anthony,
Founding Partner, Legal & Compliance, LLC
Securities, Reverse Merger and Corporate Attorneys
Securities attorney Laura Anthony provides ongoing corporate counsel to small and mid-size public companies as well as private companies intending to go public on the over-the-counter market, including the OTCBB and OTCQB. For nearly two decades, Ms. Anthony has dedicated her securities law practice to being “the big firm alternative.” Clients receive fast and efficient cutting-edge legal service without the inherent delays and unnecessary expense of “partner-heavy” securities law firms.
Ms. Anthony’s focus includes, but is not limited to, crowdfunding, registration statements, PIPE transactions, private placements, reverse mergers, and compliance with the reporting requirements of the Securities Exchange Act of 1934, including Forms 10-Q, 10-K and 8-K, as well as the proxy requirements of Section 14. Moreover, Ms. Anthony represents both target and acquiring companies in reverse mergers and forward mergers, including the preparation of deal documents such as Merger Agreements, Stock Purchase Agreements, Asset Purchase Agreements and Reorganization Agreements. Ms. Anthony prepares the necessary documentation and assists in completing the requirements of federal and state securities laws and SROs such as FINRA and DTC for corporate changes such as name changes, reverse and forward splits and change of domicile.
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