Are social media and material information compatible?
Earlier this week, the Security and Exchange Commission (SEC) said companies may use corporate social media channels such as Facebook and Twitter to "announce key information in compliance with Regulation Fair Disclosure (Regulation FD) so long as investors have been alerted about which social media will be used to disseminate such information."
I am a believer in social media as a very effective tool for amplifying a company's communications or allowing a company to connect directly with its customers, but I'm not as excited about its new descriptor as an investor communications channel.
For some companies, this is great news -- as long as you are confident the particular channel or channels you are going to use for disclosure are a "recognized channel of distribution for communicating with [your] investors."
However, I suspect that what indicates a channel is a recognized investor communications vehicle will be subject to much debate. Plus, the SEC's guidance on this is far from black and white, and ultimately the SEC leaves the determination up to the company itself. For all of these reasons, I expect many publicly held companies won't adopt social media as a disclosure mechanism for material information.
Before anyone concludes that I don't think social media is a useful communications tool, I want to point out that my opinion hinges on five words: disclosure mechanism for material information. As I noted, social media is a very effective tool for extending the signal of your other communications, and I believe there is value to be gained for virtually every company from engaging in social media. You just need to do your homework so that you apply the appropriate strategy -- and that's no different when considering investors as your audience.
Among other things, you need to assess how they consume information, to what extent they use social media for business (my understanding is that several financial services companies block access to Twitter or Facebook), and if using social media will make it easier or harder for your investors to get the information.
I expect the conversation about social media and investor relations to continue for some time. And I have no doubt there will be lots of different opinions (social media always garners a visceral reaction
when discussed at National Investor Relations Institute (NIRI) Boston meetings).
My initial recommendation is that companies who aren’t already heavily “social” should take this slowly. If they aren’t already using social media to augment their traditional forms of disclosure,
they should test it and see how it goes. They can ask investors if they like receiving information that way. Investors are not shy. They will tell you what they think.
I’d love to hear opinions from other Investor Relations Officers or Corporate Communications people about this SEC announcement? If you are in communications, do you want to see your company take advantage of this? If you are an investor, is it a channel or vehicle you’d find helpful?