U.S. companies will now be able to post their earnings onTwitter or update their status on Facebook as long as investorshave been told in advance where to look.

The U.S. Securities and Exchange Commission issued guidanceyesterday permitting companies to use social media sites includingFacebook Inc. and Twitter Inc. to communicate companyannouncements. The guidance came as part of a report detailing itsinvestigation into Netflix Inc. Chief Executive Officer ReedHastings, who in July posted monthly viewership results on hisFacebook page rather than in an SEC filing or news release.

The SEC refrained from bringing an enforcement action againstHastings or Netflix, which runs a subscription service for watchingtelevision programs and movies, because rules around using socialmedia for company disclosures had been unclear, the agencysaid.

“Most social media are perfectly suitable methods forcommunicating with investors, but not if the access is restrictedor if investors don't know that's where they need to turn to getthe latest news,” George Canellos, acting director of the SEC'senforcement division, said in a statement.

The SEC confirmed that a regulation prohibiting companies fromdisclosing material information to select investors applies tosocial media and other emerging means of communication the same wayit applies to company websites. Company communications made throughsocial media channels could constitute a violation of the fairdisclosure rule known as Regulation FD if investors had not beentold in advance where the information would be posted, the SECsaid.

Social media “has tremendous potential to level the playingfield for participants in the markets,” said Stephen Diamond, asecurities law professor at Santa Clara University's School of Law.The report “shows a commission that's being flexible andresponsive, and it shows a government agency that actually thinksinnovation is a good thing.”

Jim Prosser, a spokesman for San Francisco-based Twitter,declined to comment.

“We welcome, and certainly agree with, the SEC's finding thatFacebook is an established means for companies and individuals toshare and disseminate information broadly,” Menlo Park,California-based Facebook said in a statement.

While the agency didn't explain exactly how a company shouldinform investors about social media use, the new guidance will givecompanies greater comfort in communicating with investors viaFacebook and Twitter, said David Katz, a partner at law firmWachtell, Lipton, Rosen & Katz.

“Do I see it as a sea change? No,” Katz said in a telephoneinterview. “But investor relations has moved into the 21st centuryand the SEC has caught up.”

Facebook Post

Hastings stirred controversy over SEC disclosure guidelines whenhe wrote in a July 3 post on Facebook's website that viewing onNetflix's video-streaming service had “exceeded 1 billion hours forthe first time” in June. The incident led to calls for the SEC tobroaden its rules to allow social media to be used to communicateto investors.

In December, Hastings and Netflix each received a Wells Notice,indicating SEC staff intended to pursue enforcement action in thematter. That same month, Hastings said that posting to his Facebookcontingent of 200,000 followers “is very public.”

Netflix said it welcomed the SEC's guidance. “We appreciate theSEC's careful consideration and resolution of this matter,”spokesman Joris Evers said in a statement.

Gene Goldman, a partner at law firm McDermott Will & EmeryLLP, said the report provides companies a road map for staying outof trouble.

“But the next time material information is disclosed on anexecutive's Facebook page without the company alerting allshareholders to look there for information, the matter will likelybe met with an SEC lawsuit instead of a report,” Goldman said.

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