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The U.S. Securities and Exchange Commission doesn't want to appear to be behind the times. Rather than punish Netflix CEO Reed Hastings for selectively posting information about the company's viewership on his Facebook page last July – without repeating the information in regulatory filings – the SEC has decided it is fine for all public issuers to post or tweet material information through social media.
"In fact, we encourage companies to seek out new forms of communication to better connect with shareholders," the SEC said this week. While it's all well and good to encourage companies to seek "new ways to communicate and engage with shareholders and the market," as the SEC puts it, the regulator seems to have looked past the poor small-time retail investor it's supposed to protect.
It's complicated enough for the average person to keep track of press releases, corporate websites and electronic regulatory filings, leaving them miles behind professional high-velocity traders who have access to Bloomberg terminals, fast trading platforms and preferential, and sometimes, advance access to information.
Now, they also have to make sure they're also monitoring multiple Twitter accounts, Facebook pages, maybe even YouTube channels, and who knows what other social media sites to keep track of everything their corporations of interest disclose. Each is a distinctly different medium, and keeping up with only one risks leaving a skewed impression: if your prime source of information on a stock is Twitter, it's hard to imagine what valuable insights you can glean 140 characters at a time.
Embracing multiple channels of communication is not wrong, and certainly the SEC is correct in calling on issuers to insure they adequately inform investors well in advance which specific social media they plan to use. But the SEC runs the risk of inadvertently creating an unlevel playing field that disadvantages those who lack the wherewithal, sophistication or time to exhaustively monitor an ever widening array of channels.
Rather, the SEC and other securities regulators would truly do investors a favour by mandating that, no matter how many channels an issuer uses, it must establish one primary central clearing house of information. That could be as simple as the News or Investor site of its website, which already serves the function for many companies. It's fine to use Facebook and Twitter – but anything shared there should also be repeated simultaneously or as soon as possible thereafter on the clearing house of choice. That will ensure issuers can continue to communicate any way they like to the market – while ensuring that even the most social media-challenged investor misses nothing.
Sean Silcoff is a contributor to ROB Insight, the business commentary service available to Globe Unlimited subscribers. Click here for more of his Insights, and follow Sean on Twitter at @seansilcoff .
Sean Silcoff