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“The internet. It’ll never take off.” “Email. It’s way too risky.” It’s thinking that’s right up there with Decca Records’ decision not to sign up The Beatles. If social media is today’s Beatles, then CEOs who can’t see it are the next Decca Records. And, more than missing the benefits, they’re putting themselves and their companies at risk.

The imperative for financial services CEOs to adapt to digital disruption and embrace the opportunities an active social media presence offers is clear. Our contention (and that of plenty of others) is that the right social media strategy gives you an ear to the ground and better engagement with customers and other stakeholders. This has a tangible positive effect on customer perception, brand sentiment and ultimately, the bottom line.

What’s less discussed, but of equal – or some would argue greater – importance is the effect of social media on regulatory compliance.

This is the other side of the social media conundrum for CEOs. The influence of social media on corporate and personal reputation cannot be underestimated, but neither can the compliance risk of not engaging. Because choosing not to engage via digital channels doesn’t just mean you miss out on the carrot of better business results; it may mean that you feel the full weight of the regulators’ sticks.

The reality is that regulators, legislators and the Financial Systems Inquiry (FSI) are all on the same page when it comes to changing the regulatory framework to support changes driven by the digital age. Citing the need for technology neutral regulations, the FSI recently made specific recommendations around removing regulatory impediments to innovative product disclosure and communication.

The ASX has also weighed in. Guidance and regulation surrounding continuous disclosure states explicitly that “an entity must disclose all information ‘concerning it’ that it becomes aware of from any source and of any character, if a reasonable person would expect the information to have a material effect on the price or value of its securities”.

The words “from any source” are clearly intended to be all-encompassing, and so include information from social media channels. For example, a tweet from an influential commentator with a significant number of followers could potentially have a material effect on share price, and would therefore need to be disclosed. Companies are being urged to monitor investor blogs and any other social media which regularly comments on them, and to show due diligence in social media monitoring where there is a risk of market-sensitive information leaking.

Further, a directive released by ASIC this week effectively renders disclosures through digital channels the default. In other words, corporations can now assume that electronic distribution is sufficient, unless consumers specifically opt out. ASIC has stated that it will interpret the electronic disclosure provisions under Pts 7.6-7.9 of the Corporations Act 2001 as saying that most disclosures can be delivered digitally, giving class order relief for Product Disclosure statements (PDS), Financial Services Guides (FSG) and Statements of Advice (SOA).

For some CEOs who have, until now, chosen to straddle the fence and monitor but not engage in social media, the time has come to actively engage. And for those who’ve done nothing should be on red alert. The risk of saying nothing when you have the power to control the message for the benefit of your organisation and its shareholders, and leaving a vacuum for others to fill, is simply too high. The civil penalties for failing to comply are hefty, and there is even scope to inadvertently commit a criminal offence.

Regulators are putting up clear flags that new channels of communication are subject to the same compliance measures as ‘traditional’ channels, and that CEOs must accept this. It doesn’t mean they are expected to respond to every tweet or rumour that gets airplay on social media, but it does mean that they need to understand their compliance responsibilities, conduct an internal risk assessment, and make sure they understand where responsibility for monitoring social media lies.

With serious compliance responsibility at stake, taking steps towards an active social media presence is becoming more important for CEOs who want to avoid the Decca mistake. Yeah, because those guitar bands were so “on their way out”.

For more about getting social for CEOs, download our new guide, Social Media for the Financial Services CEO, which gives you the step-by-steps for getting social right for the c-suite – and why you need to start today.

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