SEC Provides Guidance on Tweeting M&A Transactions

Twitter_logo_blue-300x243According to US securities laws and regulations certain financial communications must be accompanied by a legend.  The following is an example of part of one such legend under Rule 134:

A registration statement relating to these securities has been filed with the Securities and Exchange Commission but has not yet become effective. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective…

Because of the length of certain required legends, it was thought that Twitter could not be used as a medium for issuing such communications because the legends would not fit within the 140-character limit.

The SEC has now issued its consent to providing a link to the full legend within the body of a Tweet, as opposed to having to include the full legend, if the following conditions are met:

  • The communication is distributed through a platform that has technological limitations on the number of characters or the amount of text which may be included.
  • Including the required legend would cause the communication to exceed the permitted length of the text.
  • The communication contains a hyperlink to the required legend and prominently tells the reader that this is where it can find the legend.

Of course, telling the reader to ‘check the hyperlink’ could take up most of the 140 characters, which may prompt the creation of an appropriate abbreviation, along the lines of CHFII (check hyperlink for important information).

No one seems to have come up with an abbreviation yet, but companies are handling the notice requirement in different ways:

An eBay tweet just included the word “legend” with the link:

More on why @PayPal & @ebayinc are best together, on @LinkedIn Legend: (CEO)

An M&A-related tweet by URS Corporation didn’t use the word “legend”:

@AECOM to acquire $URS Corporation

However, the link takes the reader to a drop-down disclaimer with a “Cautionary Note Regarding Forward-Looking Statements.”  Visitors have to click to confirm that they have read the cautionary note before they are able to access the site with the details of the deal.

A DirecTV tweet used another method:

The merger announcement will have no impact on DIRECTV’s existing products, services or programming. To learn more read our Customer FAQs at [link to]

The link connects to an FAQ page with the disclaimers in small type at the bottom.

It remains to be seen whether the SEC will favor (or disfavor) any particular method of “prominently” telling readers where to find the disclaimers.

As night follows day, a Tweet will be followed by a re-Tweet.

The SEC also made clear that the original Tweeter is not responsible if a later Tweeter fails to include the link to the required legend:

If the third party 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 (i.e., re-tweeting) beyond having initially prepared and distributed the communication in compliance with either Rule 134 or Rule 433, the re-transmission would not be attributable to the issuer.

Of course, investors should remain wary of getting investment advice from tweets — with or without disclaimers.

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