SEC Rule Change: Social Media Just Got More Powerful
This week was a watershed moment for social media.
A ruling by the Securities and Exchange Commission means publicly listed companies can now use social media to make official company announcements to investors, rather than just via press released on web pages and electronic news wires.
The news has huge implications for the way millions of people use social media, it means platforms like Twitter and Facebook will become networks where literally trillions of dollars in investment decisions will be made, beyond the trading desks and Bloomberg terminals of millions of money players across the world.
What the Changes Mean:
The acknowledgement by US officials of the importance of social media as a place for the dissemination of vital information for financial means is a huge step for social media and could significantly change the way companies and investors behave.
SEC rules require companies to inform investors and the public at large by disseminating important information at the same time on predetermined mediums in order for investors and firms to act on a level-playing field.
The changes came about after the CEO of Netflix tweeted his way into trouble last year, announcing his firm had executed 1 billion hours of video in a month for the first time, a move that boosted the share price and caught the attention of regulators.
The SEC said "an increasing number of public companies are using social media to communicate with their shareholders... we appreciate the value and prevalence of social media channels in the contemporary market communications, and the commission supports companies seeking new ways to communicate."
In 2012, only 14% of companies used social media to communicate with investors (tweeting the same time as official press releases). With these changes, listed firm use of social will no doubt explode, as corporates feel more comfortable using social to communicate with investors and the wider public.
Social Media Strategy for Finance Firms & Publicly Listed Companies:
The rules changes mean firms across the world will need to put in place strong social media strategies not just for the announcement of vital information, but to mitigate the risk firms face from hackers, and rumor mongers using Twitter, Facebook or LinkedIn to manipulate share prices.
Social Media Risk Mitigation:
The changes also mean investors need to be trained to recognise that social media can and will continue to be a place where traders can potentially manipulate markets through fake announcements and other rumours fueled by the instant nature of social media.
The Downfall of Business News Wires?
The changes could have implications for long used news wire services, companies could now focus their attention to social networks for announcements, and that would mean investors would need to become very savvy at organising and reading social media feeds.
The changes could also mean new social networks could spring up, focusing purely on company announcements where traders, investors and firms gather, as a way to filter out the noise from non-financial content.
CEOs and Big Town Investors Can Now Speak to the Public Directly:
The new rules would also allow major personalities at corporations to be more comfortable to engage with not just investors, but also clients and customers via social media.
"Social media is providing a great, authentic way for investors to get access to the insights of key executives at companies, this is a great opportunity for senior executives to talk to their customers," Former Chief Privacy Officer at Facebook, Chris Kelly told Bloomberg TV.
This decision "is a positive recognition of the way the world has changed," Kelly noted.
How do you think the SEC rule changes will play out?
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