SEC Blesses Social Media

Apr 4th, 2013 | By | Category: Social Media

SECOn Tuesday, the SEC announced that companies can use social media to broadcast what the Wall St. Journal calls “market-moving corporate news”. The ruling, according to the paper, said that “postings on sites such as Facebook and Twitter are just as good as news releases and company websites as long as the companies have told investors which outlets they intend to use.”

This change of heart will have profound implications on how companies communicate material financial information to the marketplace. First, it helps companies expand the pool of investors it can reach. Second, it will allow firms to employ communication channels that were previously considered off-limits under Regulation FD. Third, it will enable companies to drive traffic to the full-length disclosures that appear on their websites.

The ruling will allow companies to use social media sites to disclose information as long as they tell investors ahead of time that they plan to use the platforms for that purpose. However, the new policy will not allow senior executives to use their personal social media profiles to communicate company financial news.

The change could conceivably spur a land rush by financial services companies, in particular, to explore social media options and venture into previously uncharted communication waters.

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