{"id":7539,"date":"2024-10-01T12:21:04","date_gmt":"2024-10-01T16:21:04","guid":{"rendered":"https:\/\/seci.wpenginepowered.com\/?p=7539"},"modified":"2024-10-01T12:21:08","modified_gmt":"2024-10-01T16:21:08","slug":"a-regulation-fd-double-down-draftkings","status":"publish","type":"post","link":"https:\/\/seciblog.pli.edu\/index.php\/a-regulation-fd-double-down-draftkings\/","title":{"rendered":"A Regulation FD Double Down \u2013 DraftKings"},"content":{"rendered":"

Back in April 2013, the SEC issued a Report of Investigation<\/a> addressing dissemination of information via social media channels.\u00a0 The report focused on a Netflix CEO\u2019s use of social media to disclose information relevant to investors without previously telling investors that information would be released via social media.\u00a0 In the report the SEC announced that social media disclosure of information was likely not public disclosure for purposes of Regulation FD, unless investors had previously been alerted that specific social media channels would be used to disseminate information to the public.<\/p>\n

Unfortunately, on July 27, 2023, DraftKings\u2019 public relations firm posted information about \u201creally strong growth\u201d on the personal X and LinkedIn accounts of the company\u2019s CEO.\u00a0 The company had not provided prior notice that social media accounts would be used to make information public.\u00a0 DraftKings\u2019 management instructed the public relations firm to remove the posts soon after they were published.\u00a0 Given that the social media posts provided previously non-public information about growth and that the information was likely material, this was probably an inadvertent selective disclosure.<\/p>\n

Regulation FD describes two types of selective disclosure, intentional and non-intentional.\u00a0 Each type has a separate required time frame to make information public.\u00a0 From Regulation FD<\/a>:<\/p>\n

(a) Whenever an issuer, or any person acting on its behalf, discloses any material nonpublic information regarding that issuer or its securities to any person described in paragraph (b)(1)<\/a> of this section, the issuer shall make public disclosure of that information as provided in \u00a7 243.101(e)<\/a>:<\/p>\n

(1) Simultaneously, in the case of an intentional disclosure; and<\/p>\n

(2) Promptly, in the case of a non-intentional disclosure.<\/p>\n

The term \u201cpromptly\u201d is defined in the rule:<\/p>\n

Promptly.<\/em><\/strong> \u201cPromptly\u201d means as soon as reasonably practicable (but in no event after the later of 24 hours or the commencement of the next day’s trading on the New York Stock Exchange) after a senior official of the issuer (or, in the case of a closed-end investment company, a senior official of the issuer’s investment adviser) learns that there has been a non-intentional disclosure by the issuer or person acting on behalf of the issuer of information that the senior official knows, or is reckless in not knowing, is both material and nonpublic.<\/p>\n

If in fact the social media posts were non-intentional disclosures, \u201cprompt\u201d disclosure would have been appropriate.\u00a0 Unfortunately, DraftKings did not make this information public until they did their regular earnings release seven days later.<\/p>\n

The company entered into a cease-and-desist order and paid a civil money penalty of $200,000.<\/p>\n

You can find more details, including discussion of the materiality of the information, how DraftKings\u2019 policies related to the disclosures, and the impact of DraftKings\u2019 cooperation during the investigation, in the SEC\u2019s Press Release<\/a> and the related Order<\/a>.<\/p>\n

As always, your thoughts and comments are welcome!<\/p>\n","protected":false},"excerpt":{"rendered":"

Back in April 2013, the SEC issued a Report of Investigation addressing dissemination of information via social media channels.\u00a0 The report focused on a Netflix CEO\u2019s use of social media to disclose information relevant to investors without previously telling investors that information would be released via social media.\u00a0 In the report the SEC announced that … Continue reading A Regulation FD Double Down \u2013 DraftKings<\/span> →<\/span><\/a><\/p>\n","protected":false},"author":9,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[261,256],"tags":[],"coauthors":[154],"class_list":["post-7539","post","type-post","status-publish","format-standard","hentry","category-enforcement","category-sec-news"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"post_mailing_queue_ids":[],"_links":{"self":[{"href":"https:\/\/seciblog.pli.edu\/index.php\/wp-json\/wp\/v2\/posts\/7539","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/seciblog.pli.edu\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/seciblog.pli.edu\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/seciblog.pli.edu\/index.php\/wp-json\/wp\/v2\/users\/9"}],"replies":[{"embeddable":true,"href":"https:\/\/seciblog.pli.edu\/index.php\/wp-json\/wp\/v2\/comments?post=7539"}],"version-history":[{"count":0,"href":"https:\/\/seciblog.pli.edu\/index.php\/wp-json\/wp\/v2\/posts\/7539\/revisions"}],"wp:attachment":[{"href":"https:\/\/seciblog.pli.edu\/index.php\/wp-json\/wp\/v2\/media?parent=7539"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/seciblog.pli.edu\/index.php\/wp-json\/wp\/v2\/categories?post=7539"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/seciblog.pli.edu\/index.php\/wp-json\/wp\/v2\/tags?post=7539"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/seciblog.pli.edu\/index.php\/wp-json\/wp\/v2\/coauthors?post=7539"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}