April 3, 2013

Social Media: SEC Issues Reg FD Guidance (In Form of Enforcement Report)

Last month, the SEC’s Division of Investment Management issued this guidance in an effort to clarify when mutual funds must file social media messaging with the SEC. The guidance provides 5 categories of communications that IM doesn’t believe needs to be filed – and examples of communications that do. [Not that it really matters, but why does IM bury the SEC logo on the bottom of its guidance? Probably just my pet peeve but it seems to be easily mistaken for a law firm memo.]

At the time, I thought Corp Fin might weigh in with its own social media guidance soon – particularly due to widespread criticism in the wake of news that Netflix had received a Wells Notice from the Division of Enforcement (see my own blog on this topic – and Prof. Joe Grundfest’s amicus curiae brief).

The answer is “yes, sort of.” Yesterday, the SEC issued this Section 21(a) Report of Investigation stating that Enforcement has decided not to go after Netflix – mostly because its 2008 “corporate use of website” guidance may not have been sufficiently clear about how it applies to social media (given that social media exploded onto the scene more recently). More importantly, the Report clarifies that the SEC’s ’08 framework is sufficiently flexible to accommodate new “push” technologies like Facebook and Twitter – so that companies should continue to apply their own facts against whether they have created a “recognized channel of distribution” using that framework.

Even though the SEC’s press release touts the new report as a greenlight for companies – the press release’s title is “SEC Says Social Media OK for Company Announcements If Investors Are Alerted” – I’m dubious that companies and their advisors will see it that way. For starters, the new guidance comes from an Enforcement report (here’s an explanation of what a Section 21(a) report is) – perhaps not the best vehicle to encourage new practices. [Not surprisingly, many mass media reporters were fooled by the SEC’s title and report that the SEC has “new” disclosure rules.]

And it doesn’t get into the nitty gritty like IM’s new guidance does. Given the slow adoption rate of social media by IR, finance and governance professionals – compared to the rest of the world – I’m not convinced this will be enough to get folks moving (for example, see this blog by Blank Rome’s Yelena Barychev; this blog by Leonard Street’s Steve Quinlivan and this Cooley news brief from Cydney Posner).

It will be interesting to compare what is said at the ABA meeting later this week – and compare that against what Dominic Jones & I say during this Shareholder Services Association webcast next week. I’ll report back (here’s a preview from Dominic, his first blog in 18 months – the dude is back!)…

Checklist: Social Media Business Case for Investor & Analyst Engagement

Don’t forget my practical checklist about making the social media business case for investor & analyst engagement. And my “How to Use Twitter Handbook,” both posted in our “Social Media” Practice Area

The Art of the Contextual Tweet (And More)

Every proxy season there are a few new social media developments that are unique. During the ’12 proxy season, for example, Yahoo! filed this additional soliciting material that includes a video – not just the transcript – in the filing as part of its coverage of strategic, governance and other initiatives.

Meanwhile, another embattled company – Chesapeake Energy – filed this additional soliciting material that disclosed the release of these two so-called “contextual tweets”:

– Tweet 1) Fact: 41% of S&P 500 companies have split the Chairman and CEO positions and only 21% have truly independent chairmen.
– Tweet 2) Companies that have recently split CEO/Chairman roles: Apple, Gannett, Avon, Moody’s. Only 21% of S&P 500 have truly independent Chairmen.

I imagine the purpose of filing these tweets was to ensure that all communications potentially relating to a solicitation are included as a 14A filing – but I’m not sure the content of these tweets rise to the level of a solicitation. One of those “better be safe than sorry” filings perhaps. What is your take?

Lastly, near the end of this additional soliciting material filed by, the company filed various tweets and Facebook postings relating to an earnings call. I haven’t checked the circumstances as to why additional soliciting material was filed in connection with an earnings call. I assume a solicitation was also in progress…

A while back, Dominic Jones shared this useful tweet that says “Can CEO tweets move markets? Decide for yourself” and links to a chart. Check it out. And this article notes that fraudsters now utilize Twitter to find victims…

5th Say-on-Pay Failure of the Year

As noted in its Form 8-K, Vermillion is the 5th company holding its annual meeting in 2013 to fail to gain majority support for its say-on-pay (44% support) – although the company’s recent annual meeting was for 2012. Hat tip to Karla Bos of ING Funds for pointing this out!

– Broc Romanek