Social media platforms, including Facebook, Twitter, YouTube and LinkedIn, allow companies to communicate with their investors, customers and the general public, and provide a 24/7 outlet for corporate disclosure. As social media platforms have become more commonplace, companies, and particularly public companies, should consider adopting a social media policy or regularly reviewing their current policy.
If used improperly by a company or its representatives, social media can create significant issues. By having a social media policy, companies can put protections in place, which may help shield a company from certain liability in the event of misuse by its management and employees. To help prevent unauthorized disclosure, a social media policy should restrict the sharing of confidential, classified, material non-public information about the company and its customers, and private information about individuals.
In addition, social media can be used to facilitate compliance with certain securities laws, particularly Regulation FD (which was adopted in 2000). Regulation FD prohibits selective disclosure of material non-public information by reporting companies to market participants and security holders, and when any such disclosure is made, Regulation FD requires the timely disclosure of such material non-public information to the public through a recognized channel of distribution.
In this context, a social media policy can (1) specify the approved channels of communication that the company intends to use to alert investors of material information, (2) indicate the types of information that may be disclosed, and (3) identify which company personnel are authorized to speak, post or tweet on behalf of the company. The channels of information should also be disclosed in advance of usage in the company’s relevant SEC filings, press releases and on its web site. The company should give the public the opportunity and sufficient time to access the particular channel being used, prior to using it to disclose material information, and use its designated social media channels consistently for regular disclosure, so those channels become recognized channels of distribution. Communications should be reviewed carefully before and during any proposed securities offerings.
Some other factors a company should consider in developing a social media policy include the following:
- Whether to create a stand-alone policy or one that is embedded in its employee handbook
- Whether it will be applicable solely to company-issued equipment and electronic devices or also cover personal equipment and devices
- Whether to prohibit any use of social media, allow some or all of its use, or actively encourage its use
- What the consequences of a violation of the policy are
- Whether to include any special regulations applicable to the company, such as FINRA, NLRA or FTC requirements, and any applicable state law requirements.
Because social media platforms constantly change and expand, companies should review their social media policies on a regular basis. Companies that are not currently using social media should periodically evaluate whether their current methods of disclosure are sufficient and effective and consider whether certain social media platforms could supplement or enhance their current investor relations programs.