Earlier this week the SEC declared social media an acceptable platform for investor relations announcements. But in such a highly regulated industry, what exactly does this mean for brands? What should a company know about how, or better yet if they should communicate with investors via social media?
To answer these questions, we chatted with industry experts from the financial and legal angles. Jennifer Openshaw is President at Finect and Columnist at WSJ’s MarketWatch and Richard Jones is a securities lawyer with Jones & Haley. They shared their recommendations on how companies should go about putting this new SEC ruling into practice.
Overall, what does Tuesday’s SEC announcement mean for companies?
“It’s a sigh of relief for many,” says Jennifer Openshaw. “The good news is that the SEC has clearly given a green light to use social media, and this is at least some formal progress in moving the industry forward. But just as we’ve seen with Netflix, the SEC will generally avoid giving a prescription for how to use social media. It rather responds to an issue or a particular case with some action. And that’s what we’ve seen here.”
How should a company decide whether or not social media is an appropriate channel for communicating with investors?
According to Richard Jones, “Each company should consider how comfortable they are with this medium, whether their audience is active in the medium, and the downside of not handling the disclosure properly in accordance with the SEC rules and regulations. If they use the medium improperly, they could have some exposure to liability.”
How should companies let investors know that they will be using social media to disclose information?
Openshaw recommends notifying investors through any public channels that are already in use, including the media and investor section of their website, a formal announcement or press release as well as more formal media like statements or earnings calls.
From the legal side, Jones adds that companies “should make an 8-K filing with EDGAR to notify the public of which social network they will be using to disclose their business announcements.”
What should the tone of financial announcements on social media be? Is there any language to include or avoid?
“The SEC isn’t against personality but they are about facts. So communication can represent a company’s tone or brand, but just be sure to be factual,” says Openshaw. Jones adds that it might also be appropriate to reference the fact that sharing from this platform is in accordance with the SEC’s new rules.
Should companies stick to brand accounts for announcements or are executive accounts acceptable as well?
“I think they should have one general brand account, and they should only use that account to make their announcements,” says Jones. “This account should be identified in their initial announcement notifying the public where they will make their announcements.”
But sometimes it’s not that simple, as in the case that brought this issue to the SEC’s attention, when Netflix CEO Reed Hastings shared a company milestone through is personal Facebook account. “The bottom line is that any information distributed by the company should be clearly coming from the company, whether it’s the company’s name solely or the position of a person,” adds Openshaw. “As an example, Zappos CEO Tony Hsieh has built a big brand and following on Twitter, but his account is clearly a Zappos account, not Tony’s personal account.”
What other questions do you have about the SEC’s new policy on social media as a communication channel for investor relations?