Automakers and other publicly traded companies can distribute critical corporate information using social media as long as they tell investors where to look for the information, the U.S. government ruled Tuesday.
The Securities and Exchange Commission's decision clears the way for public companies to post market-sensitive information to Facebook, Twitter and other social media sites.
But the SEC also said executives should not use social media to "disclose material corporate information" because their personal Facebook and Twitter accounts "would not ordinarily be assumed to be channels" where investors would find that kind of information.
The government agency had been weighing the issue after Netflix CEO Reed Hastings last summer posted a Facebook status update with information about the video streaming service's performance. His post caused a spike in Netflix's stock price.
The SEC said Netflix and Hastings won't be punished. Still, it ruled, public companies must alert their investors if they plan to start using social media to relay vital information.
The ruling also comes after Silicon Valley entrepreneur Elon Musk, CEO of Tesla Motors, teased investors with a post last week previewing a promising company announcement. Tesla's stock spiked after the revelation.
"One set of shareholders should not be able to get a jump on other shareholders just because the company is selectively disclosing important information," George Canellos, acting director of the SEC's division of enforcement, said in a statement. "Most social media are perfectly suitable methods for communicating with investors, but not if the access is restricted or if investors don't know that's where they need to turn to get the latest news."
The ruling is particularly important for the auto industry, which relies heavily on social media to communicate with the public. Several auto executives, such as General Motors North America President Mark Reuss and Chrysler Vice President of Product Design Ralph Gilles, distribute information through Twitter.
"Regulatory bodies are catching up with the way the general public is adopting new technology," said Charlie Wollborg, founding partner of marketing firm Curve Detroit, in an interview.
Wollborg said he's advised companies on how to deal with the fallout after unsuspecting employees with access to a company's social media account posted sensitive information before it was supposed to be released. Businesses must be careful to notify social media members of information that should remain secret, he said, because once something is posted, it's hard to take it back.
"If it's a big-enough company, somebody already screen-shot it," he said. "There is no deleting it anymore."
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