The Wall Street Journal: SEC Accepts Social Media: What's Next?

The thumbs up the SEC gave to social media garnered praise from at least one industry expert.

"It's a step in the right direction in terms of acknowledging that we're in the 21st century, that this social-media thing is not a joke and that it's here to stay," said Jeff Corbin, chief executive at KCSA Strategic Communications and the author of "Investor Relations: The Art of Communicating Value."

As WSJ reported, the SEC said postings on sites such as Facebook Inc. and Twitter are just as good as news releases and company websites, with the catch being companies have to tell investors which outlets they intend to use. The move was sparked by an investigation of a July Facebook posting from Netflix Inc. CEO Reed Hastings, who bragged that his company's monthly viewing had exceeded one billion hours for the first time.The information in his Facebook post sent the stock higher that day. As part of its Tuesday announcement, the SEC said it wouldn't pursue civil charges against Hastings.

In a conversation Wednesday morning, Corbin said the SEC now needs to take the next step and become more specific with its latest decision on social media. Here's an edited version of the Q&A.

MarketBeat:What's your big takeaway from yesterday's announcement?

Corbin: It's a great thing and a surprising thing given the way in which the SEC has traditionally embraced new things. My takeaway is that the SEC really is ahead of the curve. Now granted, Netflix is what inspired this. But the fact that they actually came out and made a pretty clear-cut statement that social media is an acceptable means for public companies to communicate, that is significant for the investor-relations industry.

MarketBeat: From an investor-relations perspective, why is this significant?

Corbin: Companies up until now have been very reluctant to embrace social media, even though it's everywhere. Now this is going to allow public companies to consider it and feel more comfortable using it knowing that they're not going to be scorned by the SEC if they use these channels.

MarketBeat: The SEC's announcement gives companies more channels to disseminate news. Is the SEC creating an environment that makes it easier for a company to bury material information?

Corbin:The issue is going to be what a company does to make the general investor aware of how they intend to communicate. If they don't communicate how they intend to disseminate information, then companies could in theory try and hide news through various channels. Ambiguity is what causes problems…The SEC needs to take their broader announcement and give some specific ideas to ensure that everyone is on board.

MarketBeat: What are some of the downsides to the SEC's announcement?

Corbin: If people aren't embracing Facebook or aren't embracing Twitter, that's an issue. To the extent that there isn't a formal way for people to know where to go to get material information, then you're going to have future Netflix situations. But at least it's a step in the right direction in terms of acknowledging that we're in the 21st century, that this social-media thing is not a joke and that it's here to stay.

MarketBeat: How will this announcement impact retail investors compared to professional investors?

Corbin: I think this is actually more beneficial to the mom-and-pop investor. They're the ones who rely more on the channels such as Facebook and Twitter and the mainstream day-to-day ways in which people are communicating, whereas the professional investor knows to go to EDGAR to pull material information. To the extent also that thesearch engines are scraping Facebook, that's going to make material news more accessible…You're going to see more material content coming across social-media feeds. News is going to land a lot quicker.

MarketBeat: It seems the broad takeaway is the SEC is merely reacting to how the world operates in the 21st century.

Corbin: In a letter I wrote to the SEC in January, I basically said 'c'mon guys, you better get on the horn and start to think about the fact that this is how people are communicating in the 21st century.' The last time they issued guidance on this was in August 2008, and it was with regards to corporate websites. Give me a break. The corporate website is like a dinosaur in 2013. Now it's mobile and social media; that's the way we all live our lives."

MarketBeat: What needs to happen next?

Corbin: The SEC needs to be a little bit more specific with regards to what steps a company needs to take. If they did that, then there would be no question as to how a company should use Twitter, how a company should use Facebook. It's all about knowing what's material and what's not material.

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