SEC to allow companies to share key info via Facebook, Twitter

US securities regulator, the Securities Exchange Commission (SEC), earlier this month, bowed to the global social media frenzy, and allowed companies to share key information with the public via digital platforms, such as Facebook, Twitter and LinkedIn.

The SEC's move came following Netflix CEO Reed Hastings posting about his company's record monthly viewership which led to a huge rise in the next-day trading.

According to analysts, the SEC had always insisted that investors be kept in the loop on significant company developments around the same time as everyone else. They add the use of social media to share news with their investors betokens the acceptance of new technology and its impact on corporate America.

According to Michael Tucker, a finance professor at Fairfield University's Dolan School of Business, while the SEC's announcement opened yet another outlet to inform investors, it would be a "big deal" only if companies actually used it.

While the move opened up additional space for investors to look for information, according to Tucker, the decision could result in a heftier workload for analysts.

Meanwhile, concerns have arisen following the Twitter-fuelled crash last week, which wiped out $136 billion off market cap in minutes, underscoring concerns over the use of social media.

The crash has led to concerns over such scenarios as a fraudster hacking a company's Twitter account to post a phony announcement about sales reaching an all-time high.  The shares of the company would rise dramatically before they crashed after investors realised the news was merely a set up for stock price manipulation.

Companies would now need to be vigilant in preventing hackers from infiltrating their social media accounts say analysts.

The SEC's decision earlier this month to let businesses disclose important financial information through Twitter and Facebook adds special significance and urgency to security considerations.

According to analysts if things went as expected, millions of investors would turn to social media to get quarterly earnings reports, acquisition announcements, and other "material" information. The step was meant to ensure corporate updates were more accessible to the public, many of whom already spent hours a day on Twitter, Facebook, and LinkedIn. The SEC's new guidelines represented a change in so far as the agency required companies to make "material" information public only via press release services like Business Wire, regulatory filings, and on their own corporate Web sites.

The entry of social media in the mix would raise the risk. Corporate Twitter accounts, in particular, had proved vulnerable to hackers with news organisations like CBS, NPR, and Associated Press falling victims of their social media accounts being hijacked my Spammers in the past few weeks.