Australian companies warned on use of social media for sensitive financial information after US announcement

The United States Securities and Exchanges Commission has allowed companies to use social media to make key announcements to investors, but a similar decision is unlikely to be made by Australian authorities.

The landmark announcement indicates the use of social media is more prolific than ever, but local experts say Australian businesses shouldn’t expect a similar decision any time soon.

A report released earlier this week by the SEC into online entertainment company Netflix found it could post important company information on its chief executive’s Facebook page, despite having never used this page as a source before.

In a statement this week, the SEC’s acting director of the enforcement division, George Canellos, said access to information posted on social media needed to be unrestricted.

“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.”

“One set of shareholders should not be able to get a jump on other shareholders just because the company is selectively disclosing important information,” he says.

Despite the US decision, the Australian Securities and Investments Commission indicated to SmartCompany it does not intend to change regulatory practices here.

An ASIC spokesperson told SmartCompany firms are able to post price sensitive information via social media but under two conditions: The ASX is told first, and the information has gone on market announcement platforms beforehand.

“Practically, the safest course is to advise that the company has posted a message to the market and include a link to that,” an ASIC spokesperson says.

The spokesperson also says companies must be particularly diligent when using social media to ensure posts are not misleading, despite the communication often being confined to a limited number of characters.

ASIC also cautioned companies about their engagement with consumers via social media saying, “They must give any market sensitive information to the whole market via the ASX first”.

While the advice specifically applies to listed companies, there are lessons for private entities with regard to revealing confidential or crucial information over social media accounts.

Founder of social media consultancy firm Dialogue Consulting, Hugh Stephens, told SmartCompany there are challenges with companies providing investor information over social media.

“One of the downsides of the platform right now is that we can’t guarantee the registered post equivalent. Even email compared to registered post has a more limited guarantee of being received by the shareholder,” he says.

“It will be a platform for communicating quarterly news, engaging with investors and perhaps involving them in more of the decisions, there is a lot of capacity there, but I don’t think we’re going to see ASIC allowing it as an official communication platform,” he says.

Stephens says the SEC decision indicates there is a possibility there will be more companies making social media bungles and it’s important for companies to manage their online presence properly.

“The mistakes which are made are often because of someone posting something which is pretty G-rated, but not understanding where people could take it,” he says.

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