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Fair Disclosure in a Social-Media World

Fair Disclosure in a Social-Media World

Nothing has propelled social media into the realm of hot IR topics quite like the SEC’s April 2013 announcement that Facebook, Twitter, and other social media channels can serve as tools for communicating with investors without violating Regulation FD.

The caveat? A public company must adequately inform the market that material information will be disclosed via social media, and must then inform the market specifically where material information will be posted ahead of the announcements actually being made.

And yet while the SEC did clarify that it views social media as a legitimate disclosure vehicle, the announcement was as noteworthy for what wasn’t said as for what was.

Since April, many law firms and experts have debated the SEC’s pronouncement about fair disclosure and social media at length. In “Investor Relations in the Social Media Age,” an article appearing on “Bloomberg Law,” Sullivan & Cromwell Partners Frank Aquila and Sarah Payne argue that the action “highlights the need for SEC guidance in this area.”

First Solar

On September 6, 2013, the SEC charged Lawrence Polizzotto, former head of IR at First Solar, with violating Reg. FD when he indicated in a 2011 conversation with roughly 20 sell-side analysts and institutional investors that the company would probably not receive a key loan guarantee from the U.S. Department of Energy. The following morning, when First Solar announced the same information in a press release, the company’s stock price fell six percent, a clear sign of the significance of the announcement.

Notably, the SEC did not charge First Solar with violating Reg. FD, instead charging IRO Polizzotto personally and fining him $50,000. Regulators explained that they did not charge First Solar because of the company’s “extraordinary cooperation” with the investigation. The SEC emphasized that First Solar had cultivated an “environment of compliance” by, among other things, having a disclosure committee.

The SEC credited First Solar for coming forward and informing the government of its alleged misconduct. It also praised First Solar for promptly issuing a press release (before the markets opened) when Polizzotto’s selective disclosure came to light, and instituting additional Regulation FD training for employees responsible for pubic disclosure even before the formal investigation had been concluded.

The moral of the story? Although the SEC’s precise stance on public disclosure and social media may not yet be spelled out in sufficiently reassuring depth, regulators clearly value what they view as an environment of compliance. In other words, companies do get credit for having the right policies and practices in place.

When it comes to Regulation FD, NIRI has outlined several best practices for IROs, some of which apply well to social media. For instance, one best practice is developing a written policy explaining the company’s disclosure culture. Another is using push technology to send interested investors and the media email alerts notifying them when important information is being disclosed, whether it’s posted on a Web site or released through social media outlets.

For more of NIRI’s ideas on making sure you’re staying on the right side of Regulation FD, visit


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