The Securities and Exchange Commission has opened the door to letting advisory firms use social media to communicate with investors.
Advisory firms and public companies can start tweeting news to shareholders without fear of running afoul of the SEC Regulation FD (Full Disclosure), the agency said Tuesday.
The guidance comes nearly two weeks after the regulator announced numerous kinds of communications that investment companies can make on social media without triggering Finra reporting requirements.
The SEC said it is now allowing investment advisory firms and other businesses to release “material non-public information” through Twitter, Facebook and other social media outlets if they first use traditional outlets to disclose to shareholders the specific social media sites that will be used to divulge company developments and the kinds of information that will be released.
In an era where social media outlets gain and lose popularity almost as quickly as pop songs, the regulator cautioned “without such notice, the investing public would be forced to keep pace with a changing and expanding universe of potential disclosure channels, a virtually impossible task.”
The Financial Planning Association said it is concerned that allowing companies to present information that could significantly affect the price of their shares through Facebook and other online sources will mean older Americans and other investors who usually stay away from social media won’t be able to stay adequately informed.
However, the SEC’s action was called a great move by Sarah Carter, general manager of social media and compliance for Actiance, a financial services social media consulting company
“As company communicators, we're viewing social communications as potential replacements for traditional press release distribution, and the regulations that we live by were written for that traditional world with traditional communications methods in mind,” she said.
The SEC warned it would be improper to announce significant company news on the personal social media site of an executive. “Personal social media sites of individuals employed by a public company would not ordinarily be assumed to be channels through which the company would disclose material corporate information,” the regulator said.
The issue was featured prominently in Tuesday’s guidance, which came from a report from the SEC’s Enforcement Division investigation of 2012 announcements by Netflix Chief Executive Officer Reed Hastings on his personal Facebook page of a 50 percent increase in the number of hours video customers had streamed from the movie outlet.
Netflix had not informed shareholders that Hasting’s personal site would be used for company disclosures, the SEC’s enforcement unit noted.
In its mid-March guidance to investment companies, the SEC said investment companies do not need to inform Finra when they mention specific funds on their social media sites if they don't talk about the merits of the investments. The regulator said mutual funds and other investment companies do not need to report to Finra if they use the word “performance” in social media communications, as long as the statements are benign.
Two allowed examples it gave were:
• “We update the performance of our funds every month and publish the results on our website.”
• “Click on this link where we provide full details of our yearly performance since inception.”