FRIDAY 5 APR 2013 10:48 AM


The U.S. Securities and Exchange Commission announced this week that social media is now a legally acceptable medium for companies to use when communicating with their investors.

The report stipulates that, so long as investors are kept in the loop as to which platform will be used, a company has the right to disseminate information via social media. The decision follows a 2008 ruling that allows investor information to be disseminated on corporate websites.

George Canellos, acting director of the SEC’s Division of Enforcement, says, “Most social media are perfectly suitable methods for communicating with investors, but not if the access is restricted or if investors don’t know that’s where they need to turn to get the latest news.”

PwC’s analysis of corporate reporting earlier this year points to 365 Fortune 500 companies already engaging in Twitter, with the numbers only increasing. It suggests that corporate websites will cease to be the most efficient outlet for providing shareholders with information.

Richard Knight, head of policy at the Investor Relations Society says the news will likely have little effect as most companies will continue to use their websites to disseminate information to investors. The promise of real-time engagement via social media may supercede the relevance of infrequently-updated websites.

While regulations in the U.S. now explicitly allow social media to be used as a stakeholder relations tool, a McKinsey report last year suggested that businesses move their reporting functions onto social media as a way of enhancing communications with technology-friendly stakeholders. The report says, “Bulletin boards, investor groups and news sites often contain erroneous information posted by individuals. Rather than standing idly on the sidelines, CFOs and investor relations professionals can use social media as a tool to engage with investors and other stakeholders to clear up misunderstandings and provide more information about their company.”

Last year, StockTwits announced its potential expansion into the UK after a strong takeup by American investors.

The UK's Financial Reporting Council has made no explicit judgements on social media and corporate reporting.