Is Twitter the new RNS? Article icon

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Regulators, by their very nature, are often behind the curve of revolutionary innovations. Take the motor car, for example. After steam-powered road vehicles emerged an act of Parliament was passed in 1865, making it a legal requirement for them to travel no faster than four miles per hour and have a crew of three, one of whom would walk 60 yard ahead carrying a red flag. Even after petrol cars were invented in 1885, It took 13 years before the red flag requirement was scrapped. It might be said that the governing bodies of stock trading are being similarly tardy in responding to social media.
 
Take the Netflix controversy. Last July, Reed Hastings, chief executive of the films streaming company, got into trouble with America's Securities & Exchange Commission for announcing on Netflix's Facebook page that its customers had consumed more than one billion hours of video in June. The post got picked up by several news outlets, and Netflix stock rose that day.
 
The SEC interpreted the comment as disseminating material, non-public information that would need to be disclosed in a regulatory filing or official press release posted on the company's website. Hastings got a slap on the wrist for not informing all shareholders at the same time.
 
Perhaps unsurprisingly, Hastings returned to Facebook to defend himself, writing: 'We think posting to over 200,000 people is very public, especially because many of my subscribers are reporters and bloggers. Second, while we think my public Facebook post is public, we don't currently use Facebook and other social media to get material information to investors; we usually get that information out in our extensive investor letters, press releases and SEC filings.'
 
However, regulatory wheels are now turning. Earlier this month, the SEC issued a report stating that companies are now allowed to release material information through their social media channels, as long as investors know that they are going to do so and which specific social media site they plan to use
 
Hastings can breathe a sigh of relief but social media regulatory compliance has just got a lot more complicated for corporate communicators in other jurisdictions.
 
What about the UK?
 
The SEC ruling applies only to companies listed on US markets and the new Financial Conduct Authority has yet to make a similar ruling about the state of play in the UK.
 
Until it does, the rules will continue to state that 'material' announcements that may affect share trading need to be released through an accredited regulatory information service, such as the London Stock Exchange's Regulatory News Service (RNS) feed.
 
Companies wanting to use the latest electronic media to connect with their investors are only able to do so once this has taken place.
 
Chris Hamilton, associate in the press office of the new Financial Conduct Authority, would not comment, other than to say: 'The FCA is looking at its own policy in the light of the SEC ruling.'
 
However, UK share trading disclosure rules are covered by European directives. Few observers expect the matter to be straightforward and most believe the best short-term advice for UK-listed companies is to carry on exactly as before.
 
It is of particular concern to companies with multiple share listings, such as Tullow Oil, which is quoted in Ireland, Ghana and London. Head of media relations George Cazenove says that, with a number of different regulatory jurisdictions to comply with, the company will have to defer to the one with the strictest criteria.
 
In that respect, the SEC ruling won't catalyse any changes at the company. He says: 'We use Twitter to highlight regulatory announcements and to feed to our website. But in terms of where you announce first, you always have to go to the highest level with the most demanding requirement, so we don't see what other choice we have.
 
'If you're a UK company with a US listing, I don't think you can change your policy on this right now, just because of this ruling.'
 
There are nuances in the SEC's announcement that are still worth corporate communicators paying attention to, however.
 
Sue Winston, head of communications at insurance group Aviva, says: 'While the SEC's review doesn't appear to impact how UK companies can disclose material, non-public information, I do think it's interesting that they've explicitly said that social media are suitable methods of communicating with investors.
 
'They've also reinforced the point that their regulations cover these non-traditional channels too. Companies that want to use social media channels to disclose this type of information must publicly state this in advance and also make sure they are comfortable that the public recognises the channel is being used in this way.
 
'It will require some planning and forethought, but I see this as recognition by the SEC that social media channels are becoming much more mainstream in terms of corporate communications.'
 
So what happens next and what is the overall direction of travel for communications of price-sensitive news in the future?
 
Multi channel approach still valid
 
Cathal Smyth, managing director of online corporate communications agency The Group, argues that most companies will release such information simultaneously, even if the SEC ruling is repeated by the British authorities.
 
'Why would you want to use only Twitter and not the RNS?' he asks. 'Most companies would probably go for multi-channel disclosure at the same time if that was an option. It makes sense to use the greatest number of channels at the same time. It would give you the best chance of getting your message across.'
 
Rupert Spiegelberg, strategy director at specialist digital communications agency Investis, agrees. 'Clients are looking again at options of using social media as a distribution channel but no-one is thinking about it as a replacement channel for existing outlets,' he says.
 
'Without doubt, this will not replace distributing messages through the traditional regulatory networks and putting press releases out to news outlets and company websites.
 
'Clients are looking at it as an additional distribution channel. You can't write an entire press release on a tweet or Facebook announcement.
 
What companies would use it for is more as a way of driving traffic to more traditional outlets.'
 
That may not always be the case, however. Technology's rapid pace of change makes future-gazing difficult but the model of company-owned communication platforms that emerged in the late 1990s when corporate websites began to become standard is already looking dated.
 
Spiegelberg adds: 'We don't talk to clients any more about having a website presence. We talk to them about their digital landscape and the need to be a publisher across multiple channels with an audience that will be engaging in different ways at different times of the day across different devices and will want to consume that information in different ways.'
 
Kate Shaw, chief executive of integrated financial communications agency Living Group, takes this even further. 'Do we get to a point where everything is through social media and you have a social hub and you're controlling what you want to receive and not having to search so hard for it or go to individual corporate websites?' she asks.
 
'Quite easily, you can see questions over the future of the corporate website. Does it have a place? In five or ten years' time, will we have corporate websites or will everything be on social media?'
 
Social media is a viable channel
 
That certainly appears to be the direction of travel, which poses a challenge for the communications and investor relations community, which has hitherto approached Twitter in particular with some fear.
 
In this light, Shaw believes the SEC's announcement is a welcome development. 'I think it's a really positive move from the SEC,' she states. 'It's saying that social media is not just about informal channels. It's about a proper and serious dissemination of information. Finally, regulators are realising that social media is a viable channel and that people are genuinely looking for different ways to gather their information.
 
'It does present a little bit of an issue for corporates if they're not set up in the right way to handle it. Most have been a little scared and reluctant to embrace social media. That's often because of their compliance team not being educated in it but it's also about fear of the regulators.
 
'It also means that social media is not informal any more. It's going to be a part of a regulated channel. People will have to be a bit careful about what they post.'
 
Others see corporate communications as a microcosm of how the latest stage of the development of the Internet is disrupting organisations.
 
'We're at an interesting point for these new social media channels,' says Smyth. 'It's about regulators trying to keep up with what's happening but it's also about corporate communications teams trying to work out what is their discipline and role and how it all works.
 
'There's a lot of movement at the moment between communications channels within companies. There's a debate as to what's the best model for handling corporate communications.
 
'A lot of territorial budget fights are going on between marketing, PR, government affairs and corporate communications functions. All these things are up in the air to some extent.'
 
The decision that the FCA has to make, in contrast, looks rather inevitable. The best guess is that, just as those red flags were replaced by better ways of regulating traffic as cars got faster, the nation's financial regulator will eventually move with the times. When it does, it is unlikely to mean the end of the RNS system.
 
'In the same way that video never killed the radio star, Twitter won't kill more traditional outlets,' predicts Spiegelberg. 'Twitter and other social media channels will just change the way we access this information.'