SEBI to Announce Social Media Norms Against Unofficial Disclosures

Internet securities have been increasingly facing threats due to the growth in networking and online presence. A piece of information goes viral even before it is confirmed to be genuine. Most people have been taking advantage of the internet freedom and exploiting information.

To put a check on these admissible actions in the economic sector, SEC (Securities Exchange Commission) issued rules to companies on use of social media for disclosing non-public material information on April 2, 2013. The Indian counterpart, Sebi (Securities and Exchange Board of India) will soon follow the footsteps and issue similar guidelines to companies who use Twitter, Facebook and other social media platforms to disclose unauthorised information to shareholders and clients.

The provisions for the same regulations (similar to SEC) are contained in Sebi’s Prohibition of Insider Trading Regulations, under Schedule II, which spells a Code of Corporate Disclosure Practice

says a Sebi official.

The reason social media platforms came under the scanner was following a Facebook post by Reed Hastings, CEO of Netflix, announcing that the company had streamed 1 billion hours of content in a month for the first time. There was a sudden jump in Netlix’s share prices from $70.45 per share to $81.72 in only a day’s time.

Sebi to announce social media norms against unofficial disclosures Reed Hastings post

Owing to everyone’s presence on social media these days, information spreads like a wild fire. In the Finance sector, a small leak on the news of rising or falling of shares can turn the market upside down. Social media platforms are not regulated or tracked for such information by authorities. Sebi will soon hire staff to scrutinize through social media sites and blogs for tips that have not been disclosed through official channels.

The norms on use of social media may put the onus on companies to keep a check on misuse of these channels, which is good, but it should ensure the official source of shareholder information like stock exchanges is kept in loop simultaneously.

said JN Gupta, former executive director of Sebi.

Most Indian companies like ICICI, Dell India, Tata, etc are present on social media platforms and use them to converse with their audience. Such cases are likely to happen in our market as well. Mohan Bhandari, chairman and MD of Bilcare recently asked BSE to investigate after the price crash in shares over a BBM (Blackberry Messenger) leak. He says,

I believe people who are behind this mischief can’t walk away with such moves and regulators are working towards it.

Monitoring social media and applying regulatory norms are the measures Sebi could soon take to tackle such issues and prevent them from happening in future.

Source: Economic Times

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