I'm an attorney with Ward and
Smith PA. I also write a column about business and law for American Business
Journals, have authored multiple books and teach an eLearning course for
entrepreneurs. You can reach me at JFV@WardandSmith.com or JimV@eLearnSuccess.com. Or you can check out my
eLearning course at http://www.elearnsuccess.com/start.aspx?menuid=3075 or http://www.youtube.com/user/eLearnSuccessor or you can purchase my books at http://www.amazon.com/Jim-Verdonik/e/B0040GUBRW
(This article was published by Triangle
Business Journal)
Do you remember the paradox about the
immovable object meeting the irresistible force?
It's based on the premise that if an
immovable object exists there can't be an irresistible force - and vice
versa.
Well, now we know the answer about which
one would win.
The Securities and Exchange Commission has
long been an immovable object.
Twitter is a relative newcomer, but it's
an irresistible force (at least temporarily).
Recently, the irresistible Twitter forced
the immovable SEC to develop new rules for how to comply with securities law
requirements when using Twitter.
Anyone who knows SEC rules (or documents
lawyers write to comply with SEC rules) knew that Twitter's 140-character
limitation was on collision course with the SEC now that Rule 506 (c) permits
advertising in private placements. But
using social media for registered offerings, proxy contests and other corporate
communications also forced the SEC to deal with reality.
The SEC stopped pretending Twitter would
disappear occurred when the SEC indicated that public companies could
communicate with investors using social media.
The SEC recently issued guidance about legend requirements in social
media.
Many SEC rules require that communications
include "Legends."
LEGENDS (in SEC Style) have to USE CAPITAL
LETTERS. Using CAPITAL letters allows
everyone to pretend people will read it.
Really, I'm not making this up.
The SEC's guidance on using Twitter or any
media is limited to where the LEGEND would exceed a media platform's technical
length limitations. When that happens,
you can use an active hyperlink to a document that prominently displays the
required legend.
But don't
expect the SEC to let you go wild. You
can't rely on hyperlinks just to save money or to avoid being boring. It has to be a technological limitation. If someone re-tweets your Tweet without the
hyperlink, you are not responsible unless they were coordinating with you. Like most SEC guidance, this relates to
specific SEC rules. So you need to check
which rules apply to your situation.
Let's jump from Twitter to LEGENDS in
general.
My favorite SEC legend story dates back to
the 1970s when I first became a securities lawyer. For certain young companies doing public
offerings, the SEC required us to put a legend on the Prospectus' first page to
warn investors about high risks: THESE
SECURITIES ARE SPECULATIVE.
I guess this example shows the SEC has
never been an immovable object. It just
wants everyone to think it is.
From this example, we learn that LEGENDS
in general have unintended side effects.
Whenever investors see anything written in CAPITALS, they IGNORE it
because they know it is BORING! I'm
waiting for SEC to realize that LEGENDS really just tell investors: STOP
READING THIS.
So, what's your favorite Government agency
doing to you?
Is there hope you will find your
irresistible force to move your immovable Government agency?
Or is your business stuck in a regulatory
swamp?
