US SEC OKs Social Media for Company Announcements

On Tuesday April 2, the US Securities and Exchange Commission (SEC) gave explicit permissionfor companies to use social media to announce key information such as financial results. This approval came with the caveat that investors must be advised in advance which social networks or sites would be used to share this information.

Company websites have been approved for disseminating company announcements under the same conditions since 2008.

One of the catalysts for the SEC’s decision was Netflix CEO Reed Hastings’s July 2012 Facebook disclosure that his company’s monthly online viewing exceeded one billion hours for the first time. Concerns were raised because this milestone wasn’t shared with investors through a press release or SEC filing. Critically, Netflix shares rose 6.2% in response. The SEC did not initiate an enforcement action or allege wrongdoing by Hastings or Netflix following its inquiry.

As recently as last week, Tesla CEO Elon Musk tweeted that something “exciting” would be announced, which sent his company’s shares higher.

In its announcement, George Canellos, Acting Director of the SEC’s Division of Enforcement said “One set of shareholders should not be able to get a jump on other shareholders just because the company is selectively disclosing important information.”

So what does this mean for communications?

Firstly it is a great recognition that channels such as Twitter and Facebook are now mainstream sources of news and information. This is especially encouraging given the financial sector’s historical struggles with social media usage.

This move is certainly likely to be well received by investors who may struggle to get information by digging through SEC filings or inconsistent or poorly indexed news feeds. But Facebook and Twitter have their own limitations. Neither has an especially effective search function and there are certainly limitations with archiving and subscription / like / follower based access to updates.

My advice is to play it safe. See Facebook and Twitter as extensions of current channels such as SEC filings or press releases posted on websites. Ensure that the disclosure channels are clearly stated on your website in several places (not just your investors’ page). And formally communicate this change in communication through established channels such as press releases.

Key point for me, though, is that Facebook and Twitter are social networks. By putting up posts / tweets you’re inviting sharing, and most critically discussion. Don’t post unless you’re prepared to engage with your community.

This post first appeared on my company's blog on April 4, 2013.

Photo credit: Stock Market Some rights reserved by Ahmad Nawawi