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Source: Financial Times, April 3, 2013 commentary

FINANCIAL TIMES > comment > blogs >

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SEC’s ruling won’t make many Facebook friends

The digerati are having fun with the Securities and Exchange Commission’s ruling that US companies can use social media to distribute market-sensitive information such as earnings reports. “Facebook Flap Forces SEC Into 21st Century,” says Forbes.

Not so fast. The US regulator’s decision to drop its inquiry into Reed Hastings, Netflix’s chief executive, who boasted about new viewing figures on his personal Facebook page, is only an incremental advance into the new millennium. It makes sense for the SEC to acknowledge the growing use of social media (I’m guessing more people saw Mr Hastings’ Facebook post than have viewed any regulatory announcement in corporate history), but I don’t think the decision will prompt fearful CEOs to tweet their earnings much more than they do already – and, even if it does, it won’t make much difference to investors.

For one thing, in the SEC’s interpretation of “Reg FD” – its “fair disclosure” regulation – the watchdog points out that impromptu use of personal websites and social media channels to disseminate material non-public information would probably still breach the rules, irrespective of the number of followers or friends an executive has.

Social media channels thrive on users’ spontaneity, which is why highly regulated companies that get all their social media outpourings vetted in advance – such as investment banks – are such lame tweeters. But with the possible exceptions of Mr Hastings and Facebook CEO Mark Zuckerberg (who wrote the official “founder’s letter” for the network’s initial public offering on his mobile phone), most chief executives are still likely to delegate social media postings to their communications, compliance or investor relations teams, using corporate accounts. It’s a shame, but there it is.

In any case, as Fortune’s Dan Primack points out, the SEC clarification falls short by not recommending that companies post their social media disclosures in a central repository, as well as on, say, Twitter and Facebook. Instead, it says companies should make “disclosures on corporate web sites identifying the specific social media channels a company intends to use for the dissemination of material non-public information”. Analysts, investors and journalists would have to subscribe to all such channels to ensure they stayed abreast of new announcements.

Expect two consequences – neither of which really advances the cause of social media, or the objective of fair disclosure:

1) another layer of regulatory boilerplate in corporate announcements (“We may on occasion distribute information via the following non-exclusive list of social media channels…” etc).

2) more dull, officially sanctioned corporate-speak clogging up your timelines.


© The Financial Times Ltd 2013



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