JPMorgan Offers Lesson in How Not to Use Social Media

JPMorgan Offers Lesson in How Not to Use Social Media

JPMorgan Chase is not having a good month. The bank’s mortgage arm recently agreed to a record $13-billion settlement with the federal government over selling risky mortgage investments.

While financial institutions can undoubtedly learn many business lessons from JPMorgan’s legal settlement, the company’s recent social media snafu has broader applicability to New York and New Jersey businesses. As reported by Investment News, its attempt to capitalize on the hype surrounding Twitter Inc.’s successful IPO backfired in grand fashion.

The plan was to conduct a question and answer session with vice chairman James B. Lee Jr. using the hashtag #AskJPM. However, the Q&A was subsequently cancelled after JPMorgan realized that Twitter users were using the hashtag to post disparaging comments about the company.

Examples included:

@RacehorseDCL: “What does it feel like when crime does pay?”

@ddayen:“What’s more satisfying: securities fraud on pension fund investors, or foreclosing on all those Alt-A loans?”

The lesson for businesses looking to capitalize the popularity of social media is that not all “buzz” is good “buzz.” Just like traditional marketing campaigns, companies must carefully consider the legal, business, and public relations implications of their efforts before taking any action.

While JPMorgan merely suffered embarrassment, other companies have faced legal headaches. Last year, Netflix received a Wells notice of potential enforcement from the Securities and Exchange Commission (SEC) after its CEO posted on his Facebook page that the company had reached 1 billion hours of viewing. Although the SEC ultimately decided not to pursue the matter, the incident highlights the many risks that social media can bring, if not executed carefully.

If you have any questions about the legal risks of using social media, please contact me, Sean Dias, or the Scarinci Hollenbeck attorney with whom you work.