From the Sox Up - Gardere Securities Law Blog - Law. Trends. Cases of Interest.

As we highlighted at the end of last year, the SEC issued a Wells notice to Netflix Inc. regarding a post by Netflix CEO Reed Hasting on his personal Facebook page.  On April 2, 2013, the SEC issued a report of investigation (PDF) stating that the SEC would not pursue enforcement action against Netflix and addressing the application of Regulation FD to a public company’s use of social media websites (the “Report”).  

In approving a public company’s use of social media channels, the Report confirms that the SEC’s August 2008 Guidance on the Use of Company Websites (PDF) applies to social media channels and further highlights that “the investing public should be alerted to the channels of distribution a company will use to disseminate material information.”  The SEC further noted in the Report that “in light of the direct and immediate communication from issuers to investors that is now possible through social medial channels, such as Facebook and Twitter, we expect issuers to examine rigorously the factors indicating whether a particular channel is a ‘recognized channel of distribution’ for communicating with investors.”

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A master limited partnership, or MLP, is a limited partnership that is publicly traded.  It combines the tax benefits of a limited partnership with the liquidity of publicly traded securities.  MLPs are limited by the U.S. Tax Code to only apply to enterprises that engage in certain businesses, mostly pertaining to the use of natural resources, such as petroleum and natural gas extraction and transportation.  To qualify for MLP status, a partnership must generate at least 90 percent of its income from what the Internal Revenue Service deems "qualifying" sources.  For many MLPs, these sources include all manner of activities related to the exploration, production, processing, refining or transportation of any mineral or natural resource, such as oil, natural gas and coal.

The limited partnership interests of an MLP are typically called common units and are analogous to common stock of a corporation.  The MLP common units represent equity or ownership interests in the MLP.  MLPs also have subordinated units, which also represent equity or ownership interests in the MLP.  The MLP common and subordinated units generally provide limited voting rights and entitle the holder to a share of the company's success through distributions and capital appreciation.

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