Twitter and Facebook are now places where companies can make official announcements. You may think that’s an obvious statement, but that hasn’t always been the case. Federal regulators have only recently made a policy reversal to ‘catch up’ with modern communications.
A Little Background
The SEC (Securities and Exchange Commission) earlier this month approved a plan to allow companies to disclose important news via social media sites. Netflix CEO Reed Hastings came under fire last summer after posting on his personal Facebook page that his company had reached an important customer milestone.
The posting grabbed headlines as a possible violation of a long-standing SEC policy requiring companies to use only specific public-facing channels (such as news releases and regulatory document filings) to disclose material information. The agency did not punish Hastings.
So, will this work in providing public transparency?
Now that companies have the go-ahead to use social media to disclose information, they can do so as long as they alert the public to that fact. In other words, a company can’t make disclosures on Facebook unless it previously announced an intent to do so. Those with access to the Bloomberg information service will soon see Twitter feeds included in company profiles. But, New York magazine reports Bloomberg will only provide Twitter information for only about 100 companies.
New policy brings new concerns
Two recent events highlight concerns of companies releasing news on Twitter. One, the SEC’s Twitter announcement itself has come under fire. As highlighted by a recent Marketwatch commentary, the SEC’s information release on Twitter came almost 20 minutes after the release of the policy reversal using traditional platforms. Shouldn’t companies be releasing information simultaneously across it’s chosen platforms to avoid releases that are advantageous to only certain groups? Plus, the markets tanked momentarily two days ago (4/23), wiping out more than $100 billion of value in just 4 minutes, after the posting of an incorrect news post on Twitter by the Associated Press.
Will erroneous information from phishing of corporate accounts or postings from ‘fake, but made to look real’ accounts lead to further market volatility?
I applaud the SEC for modernizing its rules to allow companies to make social media disclosures, but what are the unintended consequences? What companies attempt to skirt the rules and post vital, but negative releases from executives’ personal accounts (which typically have fewer followers than corporate accounts)? Will the companies be forced to make the informational releases simultaneously across all platforms? I fear, as is often the case in Washington politics, that potential loopholes in the new SEC guidance could wind up leading to more harm than the outdated anti-social media policy.