Bankers, financial advisers and certainly corporate boards have always needed to take great care in the dissemination of information online. With the recent advent and explosion of social media sites such as Twitter and Facebook where nominal bits of information are regularly shared the occasional "slip", be it planned or simply a byproduct of having a social presence, is bound to occur. Just such an event has happened more than once though perhaps none more publicized than 2012's post by a globally recognized entertainment streaming company.
The Securities and Exchange Commission (SEC), the government entity tasked with maintaining fairness in public company transactions, has long held that "information about the company's earnings and operations must be disseminated to all parties simultaneously"1. Any abuse to prefer one group or individual leads to charges of crimes such as insider trading. Information must be shared equally and fairly so that one person or group does not gain an unfair advantage over others.
Spoof Aloof
Arising fast on the list of questions is how the market would be affected by a spoof announcement containing contrived information from a forged account appearing to be trustworthy. Today the ability to spoof everything from an email to a Facebook page or Twitter account is in the hands of anyone with an Internet connection. When paper was the dominating method of spreading information counterfeits were possible though it is the cost which generally prevents such a practice. Imagine in today's climate and economy if someone spoofed a Tweet from the Chairman of a large corporation such as Apple. Conceivably immeasurable damage could be incurred by the corporation, all of the investors and the entire market as well.
Guarding against egregious actions by financial hackers, for lack of a better term, must also become a focus of not only the corporate world but responsibility may also be transferred to social media channels to police activities and provide for immediate corrective actions. Unfortunate though it may be to all social media users one simple Tweet could result in widespread panic driving stock prices down at least temporarily. What we do not want is the situation wherein it makes more fiscal and governmental sense to create new regulations which choke the channel.
Burden of Verification
"We now live in a society where people tend to believe what they see or hear with little regard for the source of information," begins a paragraph on Canadian site The Running Librarian.2 Anyone who has taken part in social media to a small degree has seen the infamous "re-post" or "re-tweet". Blindly those are forwarded on often to a viral status without any further investigation. Many times the original poster uses words to make the sharing of the information enticing like "hot inside tip" which generally results in compliance by the reader and multiple shares across all platforms and outlets.
Unchecked gullability is rampant online and scammers are well aware of this. When the scammer is a multi-million or billion dollar investment team looking to temporarily drive down stock prices for a particular corporation they may stand to make hundreds of thousands of dollars in just a few minutes from a manipulated market. Enticing though this may be it is an activity with criminal intent and far from a victimless crime. Reprecussions from a successful event could ripple around the globe harming both investor and the market including the retail market.
A Wells Notice?3
Netflix Chief Executive Officer, Reed Hastings in July 2012 made a post to the company's Facebook page which read, "Netflix monthly viewing exceeded 1 billion hours for the first time ever in June." The post was accessible to the more than 244,000 subscribers to the page.4 The result of the tweet was excitement among investors and the market and though relatively small in the grander scale of the global economy could have created an increase in value to only that portion of stockholders who have a Facebook account and "Like" the Netflix corporate Facebook page.
When a Wells Notice is sent it is the SEC's method of serving notice to an organization further action is on the way. What the further action was, in this case, is a deeper understanding of the role of social media in today's connected world even within the financial services and corporate world. Whether the actions on part of the SEC of April 2, 20135 result in a better way to share information with masses or a better way to fool the public remains to be seen.
Big Changes
Regardless of whether or not it is the right thing to do and the right way to do it the time has come for a deeper embrace of social media by the financial services industry. Social media has, in many instances, replaced other forms of information exchange including direct mail, email and even telephone calls. Certainly social medie is faster and much more cost efficient than any other communication channel. Additionally, by permitting more open expression in this new media formerly frowned upon by regulators, it is possible a floodgate of new tools to ferret out corporate announcements, a slew of new operators to manually monitor and post the necessary information and a new set of investors who are harvested strictly from social media readers.
Perhaps one of the most cautionary points of the lighter regulation is that the corporation or financial organization must make the public aware of where relevant and trustworthy information is to be posted. Still there will be counterfeited sites, posts, tweets, and even websites as there have been since the Internet first became a tool for exchange. While innocent people are caught in the crossfire providing a security net for them will require a unified front from many angles including social media professionals.
As Social Media Advisers
"First, do no harm", has now spread to many fields. Within social media production are millions of independent resource centers each capable of harming the economy on a local, national or even global scale. Everything from corporate leaks to failure to directly address issues started in social media the onus now falls on social media managers to quickly and appropriately respond within the boundaries of corporate guidelines. This, of course, highlights the necessity for communication which joins the human factor, the legal factor and the economic factor. Furthermore to ensure that information is factually accurate and equally accessible to all investors both current and potential.
Evaluation of current corporate operations directives which apply in the social media sector are necessary posthaste. Should you be the person charged with managing social media for an SEC regulated organization this announcement should both excite you and cause you to take much more seriously the role you play in delivering timely, accurate and acceptable information. While this will result in an expanding of the employment base within social media for consultants, operators and even attorneys, it comes with a back side to the blade which is increased responsibility to ensure the information delivered is properly termed and released in a manner which pleases the market and the SEC.
There are some 15,000 publicly traded companies in the United States. Even companies with lower valued shares, often called "penny stocks", may be used to dupe individual investors in manipulation schemes. Social media professionals may be more keen to identify fraudulant use of brand identities in the sphere than the average user. For this reason if no other it may be incumbent upon social media managers and consultants to alert the SEC upon the discovery of unusual activities in the channel.
1Investopedia http://www.investopedia.com/financial-edge/0212/how-the-sec-regulates-social-media.aspx
2The Running Librarian http://blogs.ubc.ca/dcostel/2013/02/19/corporate-leaks-and-social-media/
3Wells Notice http://en.wikipedia.org/wiki/Wells_notice
4CNBC http://www.cnbc.com/id/100289227
5Wall Street Journal http://online.wsj.com/article/SB10001424127887323611604578398862292997352.html