Much has been said about the ASX’s recent guidance (Note 8) dealing with company monitoring of social media. In essence, the ASX has advised that listed companies should have processes in place to monitor investor blogs, chat sites and other social media outlets to ensure they are aware of postings made about the company, particularly when a market sensitive announcement is pending or a company is close to finalising a market sensitive transaction.
This means for the first time in Australia, there is now a direct link between listed companies and the social media conversations about them and an expectation that these conversations will be monitored.
This compares with the US, where the Securities and Exchange Commission (SEC) recently issued a report saying companies could use social media platforms such as Facebook and Twitter for regulated disclosures including financial updates and material announcements. The only requirement in doing so is that a company alert investors about which channels it will use to disseminate the information.
In its report, the SEC said it appreciated the value and prevalence of social media channels in contemporary market communications and supported companies seeking new ways to communicate. The Commission’s latest guidance builds on its advice in 2008 that companies could use their own websites and blogs to communicate market-moving information. Several US companies including eBay and Dell already use Twitter for financial information disclosure to investors.
There is speculation among commentators that regulators in other regions will follow the SEC’s lead.
Acknowledging this international trend, the ASX’s guidance on social media was a big step for our local exchange. In practical terms it means companies must be ready to manage their online reputation – not just listening, although this is important, but also having an escalation plan in place to respond quickly and appropriately when leaks or price sensitive information are raised in social media channels. This planning should include mapping potential scenarios, issues, appropriate actions and/or responses and responsibilities. Obviously, it is also necessary to have a good social (and traditional) media monitoring service and process in place.
Corporate social media use and acceptance in Australia continues to escalate and some local companies already use tools such as Twitter to re-publish key details of ASX announcements (linking to the ASX website). As companies and investors get more comfortable with social media as a channel for market communication, countries such as Australia which retain a single information platform are starting to look a little bit behind the times. While the ASX’s single information platform remains, there is no doubt that the exchange is clearly investigating the future role of social media and acknowledging the value of these tools in its latest guidance. Whether they like it or not, Australian listed companies may soon need to embrace social media.