How does RegFD apply to Twitter and other social media channels?

Question:   How does RegFD apply to Twitter and other social media channels?

Answer:    First you need to define RegFD: If news affects the future performance of your stock, it should be distributed to all parties at the same time, usually via a press release.

RegFD was written to provide all parties equal access to the news and information so they can determine whether to buy or sell the stock. Limiting insider information ensures an equal playing field for all stock holders.

So the real goal here is to define what topics your client can and cannot discuss online and to put company guidelines in place to ensure everyone is on the same page.

What can or cannot be discussed? This varies greatly by company.

For example, if you run a retail company, no employee should ever be tweeting or making status updates about how slow business is. Same for pending new partnerships, ending partnerships and discounts. How does this hurt a company?

Let’s say that Jay works for Company X.

Jay tweets out: “Time to celebrate, we just landed the biggest clienti Texas!”

Sound innocent enough….   but here is how an analyst could read it:  Company X just landed a big deal but at what discount or expense? What did the company do to get this business? Who does it affect? How does this affect the bottom line?

And its not just analysts, here is how another client could read the same note:    “Company landed a big deal, what kind of discount did that client get, I want a similar discount. ”

As you can see, even a tweet as generic as this could have company wide implications and provide inside information to the savvy investor.

Being online and part of the online conversation is key for every company, be smart. Before you kick off a company wide program, write a solid set of company guidelines reiterating what can and cannot be discussed online to ensure no tussles with the SEC.

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Tagged as: investor relations, IR, IRO, RegFD, Social Media