Want proof that advisors need to be engaging with social media? Consider the SEC’s decision this week to let publicly traded companies make material corporate announcements on sites like Facebook and Twitter.

In a report issued on Tuesday, the SEC clarified that its Regulation FD rules permit companies to use social media outlets to make significant corporate announcements, provided that those sites are generally accessible to the public and that investors have been notified about which social channels a firm intends to use.

The move will have the greatest impact on advisors who track individual equities, says Stephanie Sammons, founder and CEO of Wired Advisor -- a Dallas-based consultancy that focuses on helping advisors build their businesses online. By establishing sites like Facebook and Twitter as a legitimate outlet for corporate communications, the guidance pushes advisors to cast a wider net as they gather information to inform investing recommendations, she says.

"In my opinion, all roads are leading to greater transparency, so financial advisors who utilize individual equity strategies are going to definitely want to keep up with Twitter accounts from publicly traded companies where they hold strategic positions," Sammons says.


Yet while Duane Thompson, senior policy analyst at the advisor consultancy fi360, called the guidance "helpful" -- as well as a "sign of the increasing prominence of social media" in new business areas -- he also suggested that the impact for most advisors will be limited.

"I wouldn't call this a vast sea change in the way financial advisors will look at market trends in the future," Thompson says.

One reason for limited impact, he adds, is the decline in active management. "Don't forget that passive investing is steadily gaining market share. Indexers don't give a hoot about CEO tweets. And fiduciary investment advisors must stick to a prudent process, whether they favor active or passive investing, or some combination," he says.

"I don't think you're going to see advisors rush to sign up for a bunch of CEO Facebook pages," he adds. "On the other hand, if active traders are following certain stocks, they are probably going to pay more attention to Twitter than they used to."


One piece of good news for advisors: The ruling will probably apply to a relatively limited number of sites with wide adoption. As part of its ruling, the SEC suggested companies should consider whether the social site in question could reasonably be considered an outlet to convey the information to the general public, rather than a select group.

"One set of shareholders should not be able to get a jump on other shareholders just because the company is selectively disclosing important information," George Canellos, acting director of the SEC's Division of Enforcement, said in a statement. "Most social media are perfectly suitable methods for communicating with investors, but not if the access is restricted or if investors don't know that's where they need to turn to get the latest news."

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