Could social media sites become major conduits for corporate actions notifications? I’m asking this in the wake of the SEC clearing the way for public companies to use social network sites such as Facebook and Twitter for key announcements.
Earlier this week, the SEC declared that social media sites are equivalent to corporate websites as long as companies conform to regulations and guidelines. Could this mark the start of companies using social media to sidestep data vendors, service providers and industry utilities?
Before I get ahead of myself, the SEC has announced (not through social media!) that companies can use Facebook, Twitter and so forth to make announcements that are in compliance with Regulation Fair Disclosure (Regulation FD) and a guidance on websites issued in 2008.
However, companies must alert investors about which social media sites will be used to disseminate such information. The SEC reminds companies to review Regulation FD and the guidance from 2008, which lets companies use websites to disseminate information to investors as long as there’s an effort to make them aware of this channel of information. (Along those lines, FINRA offers e-learning courses to help registered representatives better understand the regulations that govern the use of social media.)
The SEC clarification follows an investigation of Netflix CEO Reed Hastings’ post on his personal Facebook page this past July 3, 2012 that Netflix had hit a milestone—more than one billion hours of online viewing in a month. Netflix had not relayed this information to investors via a press release or Form 8-K filing. It also did not mention the milestone in a press release sent out later that day. The disclosure occurred after Netflix’s stock price began moving upward and was $70.45 at the time of the Facebook posting. The stock price then rose to $81.72 at the close of the following trading day, according to the SEC.
SEC officials decided not to initiate an enforcement action or allege wrongdoing by Hastings or Netflix. Yet “recognizing that there has been market uncertainty about the application of Regulation FD to social media,” the SEC issued the report of investigation about Netflix. “Today’s report clarifies that company communications made through social media channels could constitute selective disclosures and, therefore, require careful Regulation FD analysis,” say SEC officials. Essentially, the SEC wants all investors to have the same access to key information at the same time.
So, as long companies play by the rules, they can use social media sites to disclose some very useful information in ways that are more interactive than static websites. As we have seen, social media sites are not only gaining subscribers and advertisers daily but they are also adding features for competitive advantage.
Is it such a great a leap of logic, then, to ask if current or new social media sites could evolve into clearinghouses for corporate actions news and announcements? Alerts, including mobile, and application links could easily be set up. Compaexplore tighter integration with incumbent internal or external systems. Social media providers, using the cloud and virtualization, could also store key corporate actions data as a paid-for service. Incumbent vendors could also explore a more aggressive use of social media sites—they may even stareel the heat of new competition.
I acknowledge that I am wading into the dangerous waters of prognostication so feel free to share your constructive comments with me and fellow online readers.
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