Tuesday, October 15, 2013

How Public Companies Can Maximize Social Media in Corporate Disclosure while Remaining Reg FD Compliant

A recent study by Cogent research said over a third of affluent investors now use social media platforms for personal finance and investing purposes and nearly 70% have reallocated their portfolios or established relationships with investment sources from content received through such platforms, which include not only mainstream social media like Facebook, Linkedin or Twitter but corporate sites and communities as well.

So it clearly should not come as news to the corporate communication professional that social media is becoming, or has become, the primary means of acquiring investor information for a large portion of the investing public. The importance of social media to keeping an updated and informed investor community and to a successful investor awareness effort cannot be overstated and the SEC regulators are responding appropriately but with fairly clear caveats.

SEC Proacts with No Action

The SEC has now recognized social media's critical role in disclosure in their April response to a Facebook post made by Reed Hastings, Netflix CEO, where he disclosed a material corporate milestone that drove the share price from $70 to over $80, without any 8-k filing or corporate news release.

With their usual ambiguity and admonition that each case will be viewed individually, the commission concluded that social media MAY be used to disseminate material corporate information without violating Regulation Fair Disclosure (Reg FD) as long as the platform’s use as such was previously disclosed and that management’s personal email is not generally seen as a recognized source of material info.

This in effect broadened the range of internet channels approved for such use from the company’s corporate website, as documented in SEC communication from 2008 to all widely used social media platforms.  The recognition by the SEC of the pervasiveness of the use of these channels by investors to source corporate information is a fulfillment of its mandate to facilitate capital formation while protecting investors.

Ambiguity Breeds Caution

While some IR professionals take issue with such ambiguity and a lack of clear guidelines for the use of social media (one survey by a leading IR provider claimed 77% of canvassed CFO’s saw the guidance as insufficient in addressing specific concerns about social media as a channel for business disclosures), one can also view the SEC’s subjective position as one that insures corporate communications professionals will be deliberate in deciding how to use online tools to keep their shareholder and investor fully and equally informed.

The MicroCapCompany Team
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About the Author: Nicholas Coriano is a Business Consultant and Planning Guru.  He is a graduate of The University of Connecticut Business School and the John Marshall Law School in Chicago.  He has worked at Merrill Lynch, The New York Stock Exchange and as an Investor Relations Agent & Consultant to Micro Cap Companies and Penny Stocks.  He is the founder and author of The MicroCapCompany.com a blog focused on providing information and advice to Micro Cap Company Executives and Investors.  You can also find him blogging about Social Media, SEO, Web Development and Tech on PushYourRank.com

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