Tweets Allowed in Proxy Contests and Securities Offerings

Transcription

1 Tweets Allowed in Proxy Contests and Securities Offerings New SEC Guidance Allows Use of Hyperlinks to Satisfy Legend Requirements in Social Media Communications with Character Limits and Limits Issuers Responsibility for Social Media Communications Re-Transmitted by Third Parties SUMMARY The staff of the Securities and Exchange Commission has published a number of new Compliance and Disclosure Interpretations facilitating the use of social media in proxy contests, business combination transactions, tender offers and securities offerings. The interpretations allow the use of active hyperlinks to satisfy legend requirements in social media communications if necessary in light of the social media platform s limitations on the number of characters or amount of text that may be included in a communication (as is the case, most notably, with Twitter). 1 In the securities offering context, the guidance also clarifies that messages re-transmitted on social media by a third party that is not an offering participant or acting on the issuer s behalf would not be attributable to the issuer, and therefore the issuer would not be required to ensure compliance with securities laws of those re-transmitted messages. The SEC staff expressly indicates that its guidance is in recognition of the growing interest in using technologies such as social media to communicate with security holders and potential investors. Because the legending requirement with respect to proxy contests and tender offers can apply not only to issuers but to any soliciting party, this guidance can also be expected to enhance the use of social media as a tool for activist investors engaging in a proxy contest, consent solicitation or tender offer. New York Washington, D.C. Los Angeles Palo Alto London Paris Frankfurt Tokyo Hong Kong Beijing Melbourne Sydney

2 Issuers should bear in mind that the newly adopted interpretations do not change the SEC s existing guidance issued in April 2013, stating that social media can be a Regulation FD-compliant means of broad dissemination only if the company has taken adequate steps to alert the market that it intends to disclose such information through that channel. 2 DESCRIPTION OF THE SEC STAFF GUIDANCE COMMUNICATIONS THROUGH SOCIAL MEDIA THAT LIMIT THE NUMBER OF CHARACTERS SEC rules require issuers and other applicable parties to include specified cautionary statements or legends in various written communications in securities offerings, proxy contests and tender offers, including: Free-writing prospectuses under Rule 433 and offering-related announcements under Rule 134 under the Securities Act of 1933; Communications made in offerings in connection with business combination transactions under Rule 165 under the Securities Act; Solicitations made (by the issuer or other soliciting parties) prior to delivery of proxy statements under Rule 14a-12 under the Securities Exchange Act of 1934; and Pre-commencement communications in tender offers under Rules 13e-4, 14d-2 and 14d-9 under the Exchange Act. 3 Those requirements would apply to electronic communications made through social media, which generally would be viewed by the SEC as writings. In the newly adopted interpretations, the SEC staff confirmed that it will not object to the use of an active hyperlink to satisfy those statement or legend requirements in electronic communications made through social media if all the following conditions are satisfied: The electronic communication is distributed through a platform that has technological limitations on the number of characters or amount of text that may be included in the communication; Including the required statements in their entirety, together with the other information, would cause the communication to exceed the limit on the number of characters or amount of text; and The communication contains an active hyperlink to the required statements and prominently conveys, through introductory language or otherwise, that important or required information is provided through the hyperlink. The circumstances in which the use of a hyperlink is permitted to satisfy the SEC legend requirements are limited. Where the social media platform does not limit the number of characters or amount of text of a message, such as on Facebook, or where an electronic communication is capable of including the required statements, along with the other information, without exceeding the applicable limit on number of characters or amount of text, the use of a hyperlink to the required statements would not be sufficient. -2-

3 THIRD-PARTY RE-TRANSMISSION OF MESSAGES ON SOCIAL MEDIA In the newly adopted interpretations, the SEC staff clarified when, in a securities offering, re-transmission of an issuer s message by a third party on social media, such as a re-tweet on Twitter or a repost on Facebook, would not be attributable to the issuer. After an issuer distributes an electronic communication on social media in compliance with Rule 134 or Rule 433, if the third party who re-transmits the issuer s message is neither an offering participant nor acting on behalf of the issuer or an offering participant and the issuer has no involvement in the third party s re-transmission beyond having initially prepared and distributed the communication in compliance with SEC rules, the re-transmission would not be attributable to the issuer and the issuer would not be required to ensure compliance with Rule 134 or Rule 433 of that re-transmission. This interpretation restates the well-established position of the SEC that whether information prepared and distributed by third parties that are not offering participants is attributable to an issuer or other offering participant depends upon whether the issuer or other offering participant has involved itself in the preparation of the information or explicitly or implicitly endorsed or approved the information. * * * ENDNOTES The new SEC guidance is set forth on the SEC s website at (Questions , , , and ). A detailed discussion of the existing guidance can be found in our memorandum, dated April 8, 2013, entitled SEC Guidance on Disclosure Through Social Media. See Rules 134(c), 165(c)(1) and 433(c)(2)(i) under the Securities Act of 1933 and Rules 13e-4(c), 14a-12, 14d-2(b) and 14d-9(a) under the Securities Exchange Act of Copyright Sullivan & Cromwell LLP

4 ABOUT SULLIVAN & CROMWELL LLP Sullivan & Cromwell LLP is a global law firm that advises on major domestic and cross-border M&A, finance, corporate and real estate transactions, significant litigation and corporate investigations, and complex restructuring, regulatory, tax and estate planning matters. Founded in 1879, Sullivan & Cromwell LLP has more than 800 lawyers on four continents, with four offices in the United States, including its headquarters in New York, three offices in Europe, two in Australia and three in Asia. CONTACTING SULLIVAN & CROMWELL LLP This publication is provided by Sullivan & Cromwell LLP as a service to clients and colleagues. The information contained in this publication should not be construed as legal advice. Questions regarding the matters discussed in this publication may be directed to any of our lawyers listed below, or to any other Sullivan & Cromwell LLP lawyer with whom you have consulted in the past on similar matters. If you have not received this publication directly from us, you may obtain a copy of any past or future related publications from Stefanie S. Trilling ( ; trillings@sullcrom.com) in our New York office. CONTACTS New York Francis J. Aquila aquilaf@sullcrom.com Robert Buckholz buckholzr@sullcrom.com Catherine M. Clarkin clarkinc@sullcrom.com Jay Clayton claytonwj@sullcrom.com Audra D. Cohen cohena@sullcrom.com H. Rodgin Cohen cohenhr@sullcrom.com Donald R. Crawshaw crawshawd@sullcrom.com Robert W. Downes downesr@sullcrom.com William G. Farrar farrarw@sullcrom.com Matthew M. Friestedt friestedtm@sullcrom.com Joseph B. Frumkin frumkinj@sullcrom.com David B. Harms harmsd@sullcrom.com Alexandra D. Korry korrya@sullcrom.com Stephen M. Kotran kotrans@sullcrom.com John P. Mead meadj@sullcrom.com Scott D. Miller millersc@sullcrom.com James C. Morphy morphyj@sullcrom.com William A. Plapinger plapingerw@sullcrom.com -4-

5 Robert W. Reeder III Robert M. Schlein Glen T. Schleyer Marc Trevino Washington, D.C. Janet T. Geldzahler Eric J. Kadel, Jr Robert S. Risoleo Los Angeles Patrick S. Brown Eric M. Krautheimer Alison S. Ressler Palo Alto Sarah P. Payne John L. Savva London Nikolaos G. Andronikos Kathryn A. Campbell Richard C. Morrissey John O Connor oconnorj@sullcrom.com David Rockwell rockwelld@sullcrom.com George H. White III whiteg@sullcrom.com Paris Krystian Czerniecki czernieckik@sullcrom.com William D. Torchiana torchianaw@sullcrom.com Frankfurt Krystian Czerniecki czernieckik@sullcrom.com Melbourne Robert Chu chur@sullcrom.com Sydney Waldo D. Jones, Jr jonesw@sullcrom.com Tokyo Izumi Akai akaii@sullcrom.com Keiji Hatano hatanok@sullcrom.com -5-

6 Hong Kong William Y. Chua Michael G. DeSombre Chun Wei John D. Young, Jr Beijing Garth W. Bray SC1: