Sina Admits It Has Not Complied With Weibo Real Name Registration Rules

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  • on April 28th, 2012

Sina’s ($SINA) recently released 20-F filing has an interesting section on regulatory risk surrounding Weibo. The company admits it has not fully implemented real name registration. Perhaps this is just legal boilerplate that investors can ignore because, you know, the Chinese government is afraid of Weibo and would never dare to shut it down, even for a few days.

If you believe that I have bridge over a beautiful Beijing river that I’d like to sell you…

From Page 18 of Sina’s 20-F (bolding added by me]:

We are required to, but have not, verified the identities of all of our users who post on Weibo, and our noncompliance exposes us to potentially severe punishment by the Chinese government.

On December 16, 2011, the Beijing Municipal Government issued the Microblog Rules. Among other things, the Microblog Rules require users who post publicly on microblogs to submit their real identities to the microblogging service provider, which is required to verify the identities of its users. Under the Microblog Rules, users are required to disclose their real identity information only to the microblogging service provider and may still use a pen name to reflect their account name on the front end. In addition, microblogging service providers based in Beijing are required to verify the identities of all of their users, including existing users who post publicly on their websites by March 16, 2012. Although we have made significant efforts to comply with the verification requirements, for reasons including existing user behavior, the nature of the microblogging product and the lack of clarity on specific implementation procedures, we have not been able to verify the identifies of all of the users who post content publicly on Weibo. We believe successful implementation of user identity verification needs to be done over a long period of time to ensure a positive user experience. However, we may not be able to control the timing of such action, and, if the Chinese government enforces compliance in the near term, such action may severely reduce Weibo user traffic. The implementation of user identity verification has deterred new users from completing their registration on Weibo and a significant portion of those who have provided identity information to us was rejected by the Chinese government database, which means that these users will have limited posting ability in the future and may cause the level of activity of Weibo users to decrease over time. Furthermore, while the Microblog Rules are not clear regarding the type and extent of punishment that will be imposed on non-compliant microblogging service providers, we are potentially liable for noncompliance of the Microblog Rules or related government requirements, which may result in future punishment, including the deactivation of certain features on Weibo, termination of Weibo operations or other punishments determined by the Chinese government. Any of the above actions may have a material and adverse impact on our share price.

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