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Social Media Compliance: Navigating the Regulations of Business Communications
In March 2012,Gene Morphis, at the time CFO of the women’s clothing retailer Francesca’s, broadcast on his personal Twitter account the tweet: “Board meeting. Good numbers=Happy Board” to his 238 Twitter followers. His gaffe was that the tweet was sent out prior to the official release of the earnings numbers. This release of insider information caused the stock to jump 15 percent, and ultimately factored into Gene Morphis being fired. CIO quotes Amy Freed, a New York lawyer specializing in corporate practice that Morphis’ tweets “could be considered a selective disclosure” which the SEC does not allow.
Despite the sticky compliance dangers of social media, the use of it by businesses continues to increase. A report by Smarsh found that 79 percent of Fortune 500 companies use Facebook, Twitter and LinkedIn when communicating with customers. And a report by Ledermark found that even in the financial industry that 85 percent of service professionals under 50 use social media. Although the financial industry remains cautious. Morgan Stanley recently allowed 1300 of their financial advisers to use ‘free tweets’ — not pre-approved ones.
The SEC recently approved guidelines for how social media can be used when referring to business operations, especially for ‘character-limited’ media like Twitter where it isn’t easy to accompany any posting with a disclaimer.
Ryan Holmes, CEO of HootSuite, wrote for the Harvard Business Review that “The alternative — banning social communications altogether and hoping for the best — is hardly an alternative any longer.”
Holmes quotes Mike Langford, social compliance strategist and financial industry veteran, as saying that “restricting communication, access to information and people networks is something I doubt you would champion as a sound business practice for the 21st century. You can resist, but your competitors and customers are moving ahead.”
