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SEC social media rule reflects growing pressure on regulators

The measure, passed last week, allows companies to share market-moving corporate news on social media sites

Last week, the Securities and Exchange Commission (SEC) passed a rule allowing companies to share market-moving news on social media sites.

The measure is good news for tech-savvy companies, who can now post corporate news on sites such as Facebook and Twitter provided that they tells investors where to find the information, but it reflects the growing pressure on federal regulators to clarify social media rules, the Wall Street Journal (WSJ) reports.

The new rule, for instance, was prompted by an investigation into whether Netflix Inc. CEO Reed Hastings had violated rules against selectively disclosing material information to investors. Hastings drew SEC scrutiny last December after he posted on his personal Facebook page that his company’s monthly online viewing had topped one billion hours for the first time.

The agency ultimately did not pursue any charges against Hastings, although it noted that corporate social media pages are more appropriate venues for disclosure than executives’ personal pages.

"An increasing number of public companies are using social media to communicate with their shareholders and the investing public," the SEC said in a report issued in the case. "We appreciate the value and prevalence of social media channels in contemporary market communications, and the commission supports companies seeking new ways to communicate."

But regulators are still facing questions about how years-old rules apply to current technologies. Some Wall Street firms, for instance, are lobbying to change laws that require them to store all the content that their employees post online. Other financial firms are also seeking to understand how investment advisors can connect with potential clients using social media, the WSJ reports.

For more social media coverage on InsideCounsel, see:

Tackling social media challenges

How to enforce ownership of social media accounts

NLRB sees increase in social media-related cases

Labor: Should you use social media to screen job applicants?

Regulating employee behavior on social media: The limits of corporate policy

Alanna Byrne

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