Inflated Private Offering: Regulating Corporate Insiders and Market-Moving Disclosures on Social Media
Marisa Papenfuss | 73 Vand. L. Rev. 311 (2020) |
The U.S. Securities and Exchange Commission enacted Regulation Fair Disclosure (“Regulation FD”) to prohibit companies from disclosing material information to select parties but not the public at large. The rapid advancement of technology since Regulation FD’s enactment has dramatically altered the ways companies distribute information to the public. Social media’s grasp on Americans’ daily lives continues to grow, as does investors’ demands for timely, relevant information. However, many public disclosures made through social media platforms cannot satisfy Regulation FD’s threshold requirement that disclosures be reasonably designed to provide broad, nonexclusionary distribution. This Note argues that social media’s current incompatibility with Regulation FD has a chilling effect on corporate speech that will only worsen as technological innovation continues. This Note further proposes a “social media safe harbor” to Regulation FD, which allows issuers and corporate insiders to disclose material information freely through social media and provides individual investors with simultaneous, unencumbered access to this information. This safe harbor would, in turn, increase the perception of fairness and increase the number of disclosures in the markets.