Liability of social media sites due to disclosure of non- public material corporate ınformation through social media

Abstract

Today, social media is being used as an information source for a variety of issues, including information concerning publicly traded corporations. However, it is not only the investing public who is interested in following the information disseminated through social media, but the companies themselves have also begun to use social media to disclose material non- public information. Accordingly, jurisdictions such as the U.S. has paved the way of such disclosures even through the personal social media site of individual corporate officers under particular circumstances. While the dissemination of material information through social media may harm the fairness and efficiency of the marketplace, it is equally beneficial for the investing public that alternative channels of effective communication develops. Having said that, the liability of social media sites for taking down a social media post of disclosure, which is deemed in compliance with the securities law, is not yet specifically addressed. A social media site may take down a social media post which has the function of disclosure, alleging that it violates the ´WeUPV of VeUYiceµ of the platform. However, such an action may have the effect of placing a number of investors in a disadvantaged position when compared to others, if some failed to read the post before it is taken down, and others did actually read it. In this case, while the social media site itself will be the cause for the interruption of disclosure which is deemed in compliance with the securities law, it will also be in a position in which it has legally exercised its right to take down the post and benefit from the internet service provider safe harbor regulations. On the other hand, investors, companies, and enforcement agencies may think of pursuing actions against the social media site for damages associated with the taking down action. To begin with, this paper underlines that the usage of corporate RfficeUV· personal social media sites for securities law disclosures may be compatible with the general theory of capital market law. Following this analysis, it suggests that the safe harbor immunity afforded to internet service providers may be challenged in the context of taking down a social media post concerning a securities law disclosure. Accordingly, it points out that the securities regulations concerning internet should be deemed ´Oe[ VSeciaOiVµ when compared to internet safe harbor regulations. It concludes that the aforementioned issue remains as an open question which the judiciary should answer, unless the legislative branch acts to clarify the legal position.