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SEC Embraces Social Media, but Questions Still Loom

Wednesday, 3 Apr 2013 | 4:55 PM ET
SEC Social Media Update
The SEC says companies can share information on social media, as long as they alert investors where it will be posted, reports CNBC's Julia Boorstin; and Michelle Leder, SEC filing expert from FootNoted.org, shares what AutoNation said about the news.

The Securities and Exchange Commission is moving into the 21st century with its announcement that companies can use social media to communicate important information.

The SEC "confirms that Regulation Fair Disclosure applies to social media and other emerging means of communication." The key thing: Companies just need to alert investors "which social media will be used to disseminate such information."

What's the upshot of this news?

It's a win for Netflix CEO Reed Hastings. This ruling follows an investigation into a post Hastings put on his Facebook page about Netflix's streaming video viewing topping one billion hours, when the company did not report that information with a press release or SEC filing.

Netflx issued a statement saying: "We appreciate the SEC's careful consideration and resolution of this matter."

It's also a big win for Facebook, LinkedIn, and Twitter.

Facebook said, "We welcome and certainly agree with the sec's finding that Facebook is an established means for companies and individuals to share and disseminate information broadly."

(Read More: Facebook's Rebound: What Drove the Stock Higher)

Bottom line: With this news companies are likely to communicate more via social media and encourage investors to follow them on these new platforms. This could drive a surge in business communication and activity.

However, questions remain, said Jeff Corbin, CEO of investor relations firm KCSA Strategic Communication.

He called the SEC's ruling significant, a key acknowledgment of "the importance of channels such as Facebook and Twitter to the way average individuals now communicate."

But he warns that it's just a first step. "Additional clarity and guidance is still required so public companies know exactly what steps they should take if they intend to incorporate social media into their communications."

(Read More: SEC Nominee Says Potential Conflicts Not a Problem)

Corbin recommends that companies take a few steps to ensure that their social media communications don't violate Reg FD.

First, he said companies should indicate all the ways it intends to communicate with investors in an annual report and in a 10-K form filed with the SEC. When companies communicate material information, he recommends that they also file a Form 8-K and post to the company's investor page.

The key thing, Corbin said, is being consistent with all announcements—ensuring that information is always communicated on the same platforms.

—By CNBC's Julia Boorstin; Follow her on Twitter: @JBoorstin

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  • Working from Los Angeles, Boorstin is CNBC's media and entertainment reporter and editor of CNBC.com's Media Money section.