COMPLIANCE risk is the most common reason given by investor relations professionals in Scandinavia to explain why they do not use social media, and various discussions and events that have tackled the topic haven’t helped to give them more comfort.
To further explore the compliance risks I met up with Annika von Haartman, Head of Surveillance at NASDAQ OMX Nordic, to discuss her views on social media, and the possibilities and challenges for IR professionals. The surveillance function monitors 800 listed companies in Sweden, Denmark, Finland, Iceland and the Baltics.
Annika von Haartman, Head of Surveillance at NASDAQ OMX Nordic
Blogs and chat rooms screened regularly
Printed media and press releases are still the primary channels for surveillance and are screened on a regular basis. If the committee does not find any information in these channels that explain share price development, they screen new media channels:
“We consider blogs as established information sources, we also screen investor chat rooms as Avanza and Nordnet on a regular basis. Quite often we discover rumors and leaks in these chat rooms,” says von Haartman.
Social media platforms such as Twitter, Facebook and YouTube are screened on a more ad hoc basis, only if content from an article or blog prompt Surveillance to review those channels.
Companies still obliged to use news wire services
The current disclosure rules require that the company have a website to publish press releases and financial results. But the rules do not consider the website to be a recognized distribution channel. According to von Haartman, this is because company websites cannot ensure the market has simultaneous access to price sensitive information.
”The website is a great platform for providing an overview of news and financial information, but since timing is crucial for investors and they can’t follow each company individually, a news release still must be distributed via a news wire service before it’s published on the website to meet the disclosure rules,” she says.
Scandinavian regulators have no plans to adopt US Securities and Exchange Commission (SEC) guidance on web disclosure (no news wire service needed if the company’s IR site is a recognized information channel) in the near future. However, von Haartman agrees that it is a practical solution, especially considering that Scandinavia has some of the highest rates of Internet adoption in the world (85 %). She is also convinced that companies’ investor websites will become an even more essential communications platform for the market:
“As social media and news wire services provides a very fragmented flow of information, that only covers bits and pieces of a company’s investment story, the company’s website will become more important, giving investors a more in-depth view of financials as well as strategy,” she says.
Presence in social media a must to reach the next generation of investors
That an online presence in social media will be required in future regulations is quite unlikely. But von Haartman points out that it is plausible that clients and other stakeholders will expect companies to interact in social media. She clearly sees opportunities with new media platforms such as Twitter and blogs, but when communicating financial disclosures, companies still must do that the traditional way i.e. by press releases distributed by PR wires.
“Companies using social media communicate that they are proactive, modern and adaptable to new technologies,” she says. “As social media is spontaneous it also gives companies the opportunity to be more personal and less conservative in their communication.”
Companies must also be aware of the fact that their analysts and investors are screening online sources for any complementary information they can find. The financial community’s hunt for information and activity in social media will escalate, according to von Haartman.
“We can already see how teenagers of today do not read traditional printed media, and are less frequent users of e-mail. They are communicating in social media and if your company wants to reach the next generation of investors, your must expand your online footprint to those platforms.”
Tweet and blog but set guidelines and strategies
The greatest compliance risk is if your company still thinks social media is a fad and does not monitor what is said about you or how staff use Twitter and Facebook.
Says von Haartman: “It makes sense to set up a strategy that either states that your company is active in new media, or not. As social media blur the limit between the private and the professional life, you have to explain to your employees that as a listed company your social media policy will be rather strict.”
According to von Haartman, it is okay for a listed company to send “live-tweets” from an ongoing webcast or Capital Markets Day, as long as they do not contain any new price sensitive information that has not already been published in a release. She also gives a green light to corporate blogs, as they can be useful for analysts and investors, providing greater context and helping them understand your business. There is no problem to blog about your latest quarterly results, but a wrap-up from a global industry conference could be considered forward looking information.
“I understand that a CEO wants to have a more personal approach in a blog, but as a public company you must be very cautious,” she says. “The challenge is to balance spontaneity and interaction with disclosure rules and a strict social media strategy. Companies that only tweet press releases are quite boring to follow.”
I’m pleased that von Haartman encourages listed companies to engage in social media, even if the disclosure rules mean that the communication has to be more controlled and less impulsive. And the greatest compliance risk is ignorance and lack of control, not engagement and a proactive social media strategy.