The tumultuous economic circumstances of the past decade lead many U.S. citizens to reflect on the challenges faced during the Great Depression through a personal lens. When the stock market crashed in 1929, fear, panic and poor banking and stock market practices combined to form a perfect and catastrophic economic storm. Despite our renewed national empathy for the experiences of this devastating period in U.S. history, the policies and systems we rely on today as a part of high-frequency trading and the global economy remain vulnerable.
Early last month, the Securities and Exchange Commission decided to allow corporations and business executives to share market information through social media. Investment information, quarterly earnings reports, acquisitions and merger details previously disseminated through press releases may now be reported within minutes on Facebook, Twitter and similar social media websites. Although the decision appears innocuous considering the information-equals-power nature of our society, it also creates new vulnerabilities for companies regarding false information, protection of confidential material and defense against hackers.
The market risks associated with real-time reporting became a reality last month, as a Twitter hoax claiming that an explosion occurred at the White House injuring President Obama led to a 150-point drop, a $136 billion market value, in the Dow Jones industrial average. This event became just one among many recent social media security incidents. CBS, NPR and BBC have all been victimized in recent hacker attacks by the Syrian Electronic Army. Hackers also targeted major corporations, including an attack on Burger King's Twitter account where false claims indicated that McDonald's acquired the company. Such false reports and security vulnerabilities carry potentially disastrous consequences for corporations, news agencies and even individual stock owners.
The risks associated with sharing market information on social media include hacked accounts leading to misinformation, false news reports and inaccurate market details, as well as leaked information and data theft. Although these issues may seem irrelevant to the average consumer, the impact on the stock market and individual companies may be very serious. As companies and executives take on greater responsibilities for securing websites and real-time reports, individual consumers may also rely on the following tips to thoughtfully respond to market information made available through social media:
- Substantiate all news reports posted on social media websites through multiple, well-established news agencies
- Carefully consider the implications for responding with any individual portfolio as a result of tips and trends reported on Twitter, Facebook and related websites
- Rely on advisors and industry experts to analyze market information