Electronic Disclosure Venues and Regulation Fair Disclosure

Background

Use of electronic means to communicate with stakeholders has been on a consistent rise over the past decade. In a 2013 survey of social media use by Fortune 500 companies. Barnes, Lescault, and Wright (2013) report that seventy seven percent of firms have twitter accounts with a tweet in the past 30 days, seventy percent are on Facebook, sixty nine percent have corporate YouTube accounts, and thirty five percent have active Google+ accounts. In addition, fifty nine percent of the Fortune 500 firms provide social media links on their corporate homepages.

Increase in social media usage has its costs and benefits. Blankespoor, Miller, and White (2014) find that by tweeting market participants links to press releases, firms that are not highly visible experience a reduction in information asymmetry and increased market liquidity.¹ Investment advisers use Facebook, Twitter and LinkedIn to communicate with clients and prospects for new business (Henricks, 2013). In general, social media provides an opportunity for businesses to interact directly with investors, customers, suppliers, and other stakeholders.

However, such interaction if not carefully monitored and supervised can yield negative consequences. In November 2013, JPMorgan created hashtag, #AskJPM, and invited Twitter users to ask one of their executives anything they wanted. Given the turmoil JPMorgan had experienced being involved in everything from the mortgage fraud scandal to speculative trading to the 2008 Wall Street Crash, the response was overwhelmingly negative. By being aware of their brand reputation, JPMorgan’s investment relations professionals should have seen this coming and altogether avoided setting themselves up in the first place (“Disaster! Social media screw-ups and how to avoid them,” 2014).