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SEC Officially “Likes” Social Media

The Securities and Exchange Commission is catching-up to the age of social media.

In new disclosure rules outlined last week, the SEC will now allow companies to use Facebook, Twitter and other social networks to release market-moving news.

Back in 2008, the SEC decided that companies could use their corporate home pages to disclose sensitive information. Now it’s bowing to the reality of social media: “An increasing number of public companies are using social media to communicate with their shareholders and the investing public. We appreciate the value and prevalence of social media channels in contemporary market communications”, according to its report.

In other words, posts on Facebook and Twitter are just a valuable as news releases and corporate websites. And companies are now free to post or tweet away…as long they make it clear which outlets they plan on using. The new rule requires companies to release information in a way that wouldn’t give an advantage to some investors over others. “One set of shareholders should not be able to get a jump on other shareholders just because the company is selectively disclosing important information. 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”, according the SEC’s enforcement agent.

Social media is a relevant link between corporations and the investing public. The fact that the SEC has embraced it as legitimate portends how relevant it will continue to be.


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