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- Client Commission Practices and Soft Dollars RIAs should always evaluate whether the products and services they receive from broker-dealers are appropriate. The SEC suggested that an RIAs failure to stay within the scope of the Section 28(e) safe harbor may violate the advisors fiduciary duty to clients, so RIAs must evaluate their soft dollar relationships on a regular basis to ensure they are disclosed properly and that they do not negatively impact the best execution of clients transactions.
Now that the Securities and Exchange Commission has given the go-ahead on public companies’ disclosure of significant corporate information on social media sites such as Twitter and Facebook, the web world is jumping all over the SEC’s news to figure out where the opportunities lie.
Significantly, Bloomberg has announced that following the SEC’s April 2 announcement, it has become the first financial information platform to integrate real-time Twitter feeds directly into the investment workflows of market professionals.
“When important news is shared on Twitter, traders and investors need to be able to access it, and validate its importance in order to incorporate that information into their decision-making process,” said Jean-Paul Zammitt, head of sales and product development for the Bloomberg Professional service, in a statement released on April 4. “Bloomberg’s platform now provides this ability, along with the high-quality news, data and analytics our users need and have come to expect from us.”
Meanwhile, the CFA Institute is weighing in on the issue through its Enterprising Investor blog, saying in “Inside Bloomberg’s Twitter A-List” that Bloomberg’s move not only adds value for its terminal customers, but also confers “considerable additional influence” on the Twitter accounts selected for the new service. Bloomberg pre-selected several thousand Twitter handles of companies and authors that report market-moving or breaking news about markets and companies.
‘Using Twitter for Sentiment Analysis Is Experimental at Best’
CFA Institute blogger Len Costa, who serves as the institute’s head of innovation and emerging media, notes that many investment professionals are only now beginning to think through how to incorporate Twitter into their decision-making.
“Some of the early evidence suggests that using Twitter for sentiment analysis is experimental at best. I’ve always thought that the power of Twitter is its ability to surface novel opinions and voices,” Costa writes.
Costa quotes a New York magazine story about “Twitter’s newest clique” that includes a list of 100 accounts displayed on the Bloomberg terminal. Writes Kevin Roose in New York: “Being on Bloomberg’s VIP list isn’t just a meaningless status symbol . . . It’s tantamount to being able to broadcast your thoughts into every firm on Wall Street, and each person on the list gets more than 300,000 silent followers, who may or may not be trading millions of dollars based on their 140-character musings.”
The network comprises “pretty much the list you’d expect,” Roose says, pointing to Twitter feeds of The New York Times’ Dealbook finance blog, financial bloggers Felix Salmon of Reuters and Reformed Broker author Josh Brown, and analysts such as Ian Bremmer and Anil Dash, along with politicians and government agencies.
Costa isn’t impressed.
“If these 100 accounts are at all representative of the full approved list of Twitter users on Bloomberg,” he writes, “it would be hard to argue that the new service is going to be an engine of out-of-the-box idea generation given the tight connections between the Twitter users—and the rapidity with which new ideas expressed in tweets can course through the network and, now, out through Bloomberg’s terminals.”
Reformed Broker Josh Brown Calls It a Natural Progression
But Brown counters that “idea generation” on Twitter is beside the point.
“I don’t think that’s relevant,” the Reformed Broker said in a phone interview on Thursday. “I think Bloomberg’s terminal service idea validates that the most important, high-level discussion about economics, earnings, investing and trading is taking place between the smartest people on Twitter and StockTwits.”
Companies’ desire to communicate with their shareholders via social media is all a part of the “natural progression,” Brown said.
“If they know their shareholder base is online, why not reach out to them on social media? They’re there. Whatever news they’re releasing instantly hits social media,” Brown said. “I don’t think it’s going to change anything that’s already happening. Bloomberg wire reporters already put their stories on Twitter first.”
SEC rules stipulate that companies must disseminate material information that could affect stock prices in a way that anybody can have access to it. That means companies have to let investors know where they can find press releases and regulatory filings.
“By allowing businesses to use more informal channels to share news with investors, the SEC is acknowledging the shift in technology that has made social media indispensable for the largest and most powerful corporations,” the Associated Press said in a report on the SEC’s green-lighting of social media use.
Read SEC’s 5 Things Not to Tell FINRA About Social Media Use on AdvisorOne.