SEC Out with New Social Media Policy, But Parallels for FDA are Few

Posted 04 April 2013 | By Alexander Gaffney, RAC 

For the second time in as many weeks, a major regulatory agency has announced the release of a new social media policy governing interactions between companies and the customers they serve, again permitting the practice within certain reasonable limits. The difference: This agency is the Securities and Exchange Commission, which, along with the US Food and Drug Administration (FDA), oversees one of the most stringent and complex regulatory areas in the entire US economy.


As Regulatory Focus noted with the Federal Trade Commission's (FTC) guidance on social media, the release of the guidance comes just as FDA is being ordered by US legislators to issue guidance, which it has another until 2014 to do under the FDA Safety and Innovation Act.

In the meantime, many industry analysts have been looking to the analysis of other regulatory agencies for clues as to how FDA might choose to regulate similar industries.

In FTC's case, the agency-which co-regulates various advertising with FDA-said it planned to allow advertising on social media so long as it kept to certain standards for the disclosure of risk. FTC outlined a basic six-part paradigm for risk disclosure:

  1. The link should be obvious.
  2. The link should be appropriately labeled regarding the information it leads to (i.e. "Safety Information").
  3. The link should be stylistically constituent throughout the content.
  4. The link should be as close as possible to the relevant information.
  5. The link should take consumers directly to the disclosure page.
  6. The link needs to be assessed for click-through rates to determine best practices and ways to improve patient use.

But FTC's areas of regulated products are narrower in scope than FDA's, and generally include less-dangerous and less-regulated products like dietary supplements, and not pharmaceutical products or medical devices.

SEC Precedence Unlikely

Could SEC's allowance of social media come to represent a precedent for FDA? Perhaps, but there are some key differences in the agency's approach to regulation relative to FTC's.

"The Securities and Exchange Commission today issued a report that makes clear that companies can use social media outlets like Facebook and Twitter to announce key information in compliance with Regulation Fair Disclosure (Regulation FD) so long as investors have been alerted about which social media will be used to disseminate such information," SEC said in a statement

SEC regulations strictly regulate which venues may be used to disseminate information, mostly under the understanding that all investors should be given the same opportunity to view the same information at the same time. If that information is spread out among various social media channels, that could confer special advantages to some investors to the expense of others.

"One set of shareholders should not be able to get a jump on other shareholders just because the company is selectively disclosing important information," said George Canellos, acting director of SEC's Division of Enforcement. "Most social media are perfectly suitable methods for communicating with investors, but not if the access is restricted or if investors don't know that's where they need to turn to get the latest news."

A Different Approach

That's a markedly different paradigm than the one used by FDA, which holds that all messages must convey a basic amount of risk information, as well as basic information about the use of the product (and in fair balance).

That would presumably leave the current paradigm for the use of social media by life sciences companies unchanged, as many currently use Twitter to release media to the press (albeit later than their official releases).

But if there is a takeaway for FDA and the life sciences industry, it's likely that social media is growing quickly in acceptance. And if it's good enough for bankers' official business, might it be suitable for FDA-regulated products as well?

For now, it's wait and see.

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