The Securities and Exchange Commission (SEC) released a confusing set of guidelines that say companies may disclose important announcements over social media, including Twitter and Facebook Inc. (NASDAQ: FB). The public corporations have to say in advance which social media they will use, which raises the issue of who tracks those social media, how and when. It also makes it difficult to determine which social media reasonably fit the new rule.
Source: courtesy of Facebook Inc.
The basic tenets of the rule were issued in a press release by the SEC. Could the announcement have been placed on Facebook as an adequate way for the government to distribute its decision? Apparently, the SEC would have had to tell investors who want to track its decisions which social media it will use. The core of the pronouncement is this:
The Securities and Exchange Commission today issued a report that makes clear that companies can use social media outlets like Facebook and Twitter to announce key information in compliance with Regulation Fair Disclosure (Regulation FD) so long as investors have been alerted about which social media will be used to disseminate such information.
Facebook and Twitter are mentioned, but MySpace, LinkedIn Corp. (NYSE: LNKD) and Google Inc.’s (NASDAQ: GOOG) Google+ are not. LinkedIn prizes itself on reaching business people and professionals. Maybe, with well more than 200 million members, it is not large enough. Google would argue that Google+ has been a raging success, but some critics say it is not used much because of the dominance of Facebook. However, Google+ has 400 million members. However, the search company says only one hundred million are active each month. How many monthly active users do Facebook and Twitter have? Who knows for certain?
The SEC has not really solved the issue of how social media can be used for important public corporation announcements. It has set very, very wide guidelines. Maybe these will work for large investment firms that can track countless messages on social networks, once companies say which ones they will use. As for everyone else, who knows?
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