INSIGHT: #HereWeGoAgain—The SEC’s Use of Hashtags Raises New Policy Questions

A funny thing happened: In May, I warned that the Securities and Exchange Commission was using hashtags on social media to draw attention to enforcement press releases—and within hours of publication, the SEC stopped using hashtags.

I explained that hashtags drive engagement on Twitter and highlighted examples of how the SEC and its regional offices were using hashtags like #accounting, #compliance, #fintech, #fraud, #investing, #securities, #whistleblowers and, bizarrely, #keysersoze to increase public awareness of SEC enforcement actions.

Defendants and their counsel should consider this distinctly modern challenge, I concluded, and be prepared to negotiate the SEC’s use of hashtags just like they would negotiate language in the press release itself.

Coincidence?

For weeks, neither the commission (@SEC_News) nor any of its regional offices or divisions has used a hashtag in a tweet relating to a pending or settled SEC enforcement action. For its part, the SEC’s Enforcement Division (@SEC_Enforcement) has not posted a single tweet since the day before the article ran. (I have not contacted the SEC to confirm the change in tack relates to my article—but the coincidental timing is striking.)

Hashtags have, however, crept back into tweets posted by the SEC and its regional offices and divisions. For the most part, the SEC is now using hashtags to promote investor education materials or to advertise the commission’s roundtables, forums, and open meetings. For example, the SEC’s Division of Economic Risk Analysis (DERA) (@SEC_DERA) recently tweeted about an SEC FinTech Forum using the hashtags #SECFinTech, #DLT and #Blockchain.

While DERA’s FinTech hashtags were pretty straightforward, the regional offices and divisions have been using other, more creative hashtags like #DadJokes, #GlobalRunningDay, #KnowtheFacts, #MondayFunday, #InternationalSushiDay, and #WeekendReads to promote educational materials and programs.

But on June 12, the SEC’s Boston Regional Office (@Boston_SEC) posted tweets announcing the entry of final judgments in two enforcements matters (here and here), and a criminal conviction in a third (here). Announcing the results on Twitter, the Boston Regional Office used the hashtags #CapeCod, #Connecticut, #elderfraud, #fraud, #moneylaundering, #ponzischeme, #pyramidscheme, and #securitiesfraud.

Difference in Hashtag Use

This development caught my eye. And the SEC’s tweet about a conviction in a parallel criminal matter, in particular, caused me to think again about the SEC’s use of hashtags on social media. I wondered: Is the use of hashtags to announce enforcement activity different from the use of hashtags to promote educational materials and programs? And is the use of hashtags to announce a criminal conviction different from the use of hashtags to announce a settled enforcement action? Yes, and yes.

In my view, the SEC’s use of hashtags to promote educational materials and programs is different from the use of hashtags to announce enforcement activity. In fact, using hashtags to drive engagement with the SEC’s educational materials and programs makes sense. The SEC’s three-part mission includes investor protection, and, in furtherance of its mandate, the SEC devotes considerable resources to investor education and engagement.

The SEC’s Office of Investor Education and Advocacy, for example, diligently promotes tools and services that help investors make informed investment decisions and avoid fraud. It, therefore, seems appropriate that the SEC and its regional offices and divisions sometimes use hashtags to promote educational materials and programs in furtherance of the Commission’s investor protection mandate.

With respect to enforcement activity, the SEC’s use of hashtags to announce convictions is different from the use of hashtags to announce settled enforcement actions. In my last article, I encouraged defendants and their counsel to consider—and possibly have a conversation with the staff about—the way the SEC will broadcast on social media press releases relating to settled enforcement actions.

A settled matter is final. The parties have agreed to the terms of the settlement, and possibly the SEC’s description of salient facts in the settlement agreement or press release. A defendant might not like the SEC’s flashy headline or hashtags, but they should not come as a surprise and may, in fact, be part of the bargain.

SEC on Shaky Ground

This is not the case when the SEC announces the results of a trial. The SEC stands on shaky ground when it uses hashtags in tweets relating to the entry of an appealable judgment—particularly, in criminal matters. (And especially when it uses inexact and potentially far-reaching hashtags like #Connecticut and #CapeCod.)

The number of securities fraud cases that go to trial is minuscule in comparison to the number of settled actions. (In FY2018, for example, the SEC tried fewer than 10 of its 800-plus enforcement actions.)

Defendants who feel strongly enough about their case to try it before a judge or jury will know that a conviction may not be the end of the matter. The SEC and its counterparts at the Department of Justice have a strong record in securities fraud trials, but their cases are sometimes (famously) overturned on appeal. As such, a conviction is not “final” in the way a settled enforcement action is final.

For that reason, perhaps, a quick scroll through the DOJ’s twitter feed suggests that the DOJ does not use hashtags in announcing charges or convictions. (Although the U.S. Attorney’s Office for the District of Massachusetts freely uses hashtags like #BREAKING, #Boston, #CollegeAdmissionsScandal, #Massachusetts, #opioid, and #Update.)

The SEC and DOJ have policies around the nature and content of their public statements relating to pending cases, and their representatives are reliably measured in statements about victories at trial. The promotion of those press releases and statements on social media should be no less deliberate, given the size of the potential audience.

The inconsistent use of hashtags to drive engagement with tweets about nonfinal matters raises important policy questions about how we want to treat defendants. Perhaps, it’s time for the SEC and other agencies to develop a social media policy position and rules relating to the promotion of enforcement actions—one that balances fundamental notions of fairness and the incredible power of social media.

This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.

Author Information

Kurt Wolfe is a member of Troutman Sanders LLP’s White Collar and Government Investigations team, where he advises public companies, financial institutions, asset management firms, broker-dealers, and individuals in connection with internal investigations and regulatory enforcement actions. Follow him on Twitter at @Enforce_Update.

The opinions expressed are those of the author and do not necessarily reflect the views of the firm or its clients.