Recently, a company settled an SEC enforcement proceeding because a public relations firm managing the CEO’s social media accounts went rogue when it disseminated material nonpublic information. Here are a few random thoughts:
- The facts of this particular SEC enforcement proceeding didn’t involve a CEO directly running afoul of the laws – so it’s a bit unique. The company’s PR firm posted social media messages that contained MNPI on the CEO’s social media accounts. The company’s communications staff quickly realized the error and had the messages removed, but the staff didn’t try to minimize the damage of broadly disseminating the MNPI after recognizing the error.
- I’m actually amazed the “CEO going rogue on social media” scenario hasn’t happened more often. There have only been a handful of social media/Reg FD cases in the two decades since social media has blossomed, including this Section 21(a) Report in 2013.
- Of course, it’s also amazing that any of those cases exist at all because they’re low-hanging fruit for SEC enforcement.
- But it’s only amazing because I’m in the business of SEC compliance. To those outside our field, the concept of MNPI being disseminated a certain way is not a natural one.
- When I was in-house, one of the harder parts of the job was teaching those in the C-suite about the perils of Reg FD. Then again, I was in-house when Reg FD was born in 2000, so it was a new-fangled concept for all back then.
- When you have a strong-willed CEO – and many of them are – it can be challenging to rein them in. They are accustomed to being in charge and doing what they want. As an in-house compliance person, you need SEC enforcement actions like this to serve as a warning to your CEO not to run afoul of the laws.
- I’m always curious about the level of penalties levied in any of the Reg FD cases. Here, it was $200,000, plus Reg FD training for those with corporate communications responsibilities.
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