The Securities and Exchange Commission’s Division of Corporate Finance issued guidance late last month on using Twitter in the context of securities offerings. This should be a welcome development for companies that communicate with clients and counterparties via Twitter, but who have been unable to connect with investors.
The first guidance addressed how to include “legends,” which are the often lengthy required disclosures appended to the end of publicly available documents like press releases and investor materials. These usually stretch on far longer than 140 characters. The SEC’s new guidance says companies can include a hyperlink to the legend, but only in communications that have limited characters (i.e., Twitter), the legend would exceed the number of available characters and the company explains in the tweet that the hyperlink leads to important information. The problem, according to an analysis by attorney Bruce Czachor of Duane Morris LLP, is that the hyperlink and explanation itself may use up a fair number of characters.
The second guidance puts corporate worries about their liability for modified re-tweets to rest. The worry was that someone who, say, removed the link to the legend and retweeted the company’s tweet would get the company in violation of securities law. The SEC has clarified that companies that tweet are not responsible for retweets.
Nonetheless, caution is warranted. Czachor writes, “Despite the SEC guidance, that does not mean it is a good idea to use Twitter or other social media for securities law disclosures. After all, the anti-fraud rules still apply and it is difficult to provide disclosure that complies with the securities laws on Twitter in 140 characters, or as little as 100 characters if the hyperlink example above is used.”
He adds, “Thus, tweeting is allowed, but tweeter beware.”