Does the SEC allow disclosure via social media, or not?
The heat is on social media and IR this week. After AP’s Twitter account got hacked on Tuesday, reporters from the Wall Street Journal and USA Today turned up in the studio audience for an unusual event on Wednesday: an on-camera forum to discuss the SEC’s April 2 report on using social media for disclosure, asking, ‘Where do we go from here?’
The answer, considering the lack of consensus among the panelists, may be: ‘Around in circles.’
Moderator Gene Marbach began understatedly: ‘There’s a bit of confusion about what the SEC ruling means.’
Cathy Baron Tamraz, CEO of Business Wire, led the status quo camp, noting: ‘The SEC said you can use social media in addition to other means.’ She likened the SEC’s new pronouncement to its 2008 guidance, which she said made websites a supplement to – not a replacement for – press releases and 8Ks. ‘No IRO thinks you can use Twitter [for disclosure], with only 12 percent of US adults on it,’ she said. ‘That’s exclusionary.’
Marketwired CEO Michael Nowlan led the insurgents who said the SEC allowed market announcements via social media – at least in certain cases. ‘It seemed to say these opt-in systems meet the criteria for Reg FD,’ he said, later remarking, ‘I think it did recognize that social media is a channel. The SEC acknowledged this is a way to build a better connection with shareholders.’
Vinny Jindal, CEO and co-founder of Stockr, a social network for investors, backed up Nowlan: ‘What the SEC said was a paradigmatic shift. The SEC is saying, Companies, you choose. It gives companies the option.’
There was more dissent around whether the SEC needs to clarify its stance. ‘We’re out there trying to get the SEC to give greater guidance,’ said Jeff Corbin, CEO of KCSA, a PR and IR consultancy. ‘[The SEC] actually created a huge amount of ambiguity and we need more guidance.’
Nowlan again stood his ground: ‘We say it was quite clear where it stands.’ IROs don’t want more prescriptive rules, he stated, and the new report even eliminates some of the confusion from the 2008 ruling, clarifying what qualifies a website or social network as a disclosure channel and how companies can let investors know.
The most novel opinions came from Jindal, a biologist who worked as a biotech equity research analyst before creating Stockr in 2010 and launching it in 2012. He pointed out that companies today use Facebook to communicate with consumers and LinkedIn to connect with potential employees, making corporate websites almost obsolete – subtly making a plug for Stockr as the future home of corporate investor relations.
‘Venue matters,’ Jindal said. ‘What’s been missing is a social media channel that’s not about broadcast.’ He also suggested that security isn’t a huge problem considering that the ‘crowd’ quickly vets everything on social media.
Co-hosts CommPRO and Onstream Media had organized a panel heavy on newswires, with all four industry leaders chiming in. The NYSE, a securities lawyer, an IR consultant and the founder of a social network rounded out the group. Though it was billed as a gathering of IR leaders, no IROs were involved, and even newswire insiders acknowledge there were vested interests at play.
If there was any clear conclusion, it was that not many issuers are likely to use social media for market announcements, in the same way that only a handful of issuers took advantage of the SEC’s 2008 guidance and started using their websites in place of press releases.
Still, everyone in the forum was enthusiastic about social media. As an IR expert in the audience pointed out afterward, the SEC’s new guidance could spur an interest in companies that up to now have been reluctant to do anything with social media. While they’re almost certain to avoid giving any material news, more senior management and IROs will now feel a lot more comfortable about tweeting and blogging.
The event will be available on demand from May 1 at CommPRO.biz.
