Use of Social Media by Reporting Issuers

Reporting issuers have increasingly been using social media to communicate information to potential customers, shareholders and other stakeholders. The Canadian Securities Administrators (CSA) are monitoring such disclosures and, on March 9, 2017, they published a notice based on their review of social media disclosure by certain reporting issuers. 

Background – General Disclosure Expectations

The notice summarizes some general principles which issuers should keep in mind to ensure high quality disclosure practices:

Unbalanced and Misleading Disclosure

  • Issuers should not make a statement that is misleading or untrue, or which does not state a fact that is necessary to make the statement not misleading and would be expected to have a significant effect on the market price of a security

  • Announcements of material changes should be factual and balanced

  • Unfavourable news must be disclosed just as promptly and completely as favourable news

  • An issuer’s press release should contain enough detail to enable the media and investors to understand the substance and importance of the change it is disclosing

  • Issuers should avoid including unnecessary details, exaggerated reports or promotional commentary

Selective Disclosure

  • Issuers (and any person or company in a special relationship with a reporting issuer) are prohibited from informing, other than in the necessary course of business, anyone of material non-public information before that material information has been generally disclosed

  • Information has been generally disclosed if it has been disseminated in a manner calculated to effectively reach the marketplace, and if investors have been given a reasonable amount of time to analyze the information

  • Posting material information on an issuer’s website is not acceptable as the sole means of satisfying the requirement to generally disclose information

Forward-Looking Information

  • An issuer that discloses material forward-looking information must identify it as such and state the material factors or assumptions used to develop the forward-looking information

  • Issuers should discuss in their MD&A events and circumstances that occurred in the period that are reasonably likely to cause actual results to differ materially from material forward-looking information which has been previously disclosed, for a period that is not yet complete

  • Issuers should disclose in their MD&A any differences between actual results and previously disclosed forward-looking information for the period

Going Forward – Improving Social Media Disclosure Practices

Issuers using social media are encouraged to focus on and improve their disclosure practices in the following three key areas identified by the CSA:

Avoid Making Selecting Disclosure on Social Media

  • Ensure that material information (including forward-looking information such as expected timing of milestones) is not provided on social media websites before it is generally disclosed. Timing of social media and traditional disclosures should be coordinated

  • Keep in mind that disclosure of material information on a social media website is not sufficient for that information to be considered generally disclosed

  • If disclosing material forward-looking information on social media websites, don’t forget that securities laws require issuers to provide material factors and assumptions supporting the forward-looking information and to update the forward-looking information when events occur that make it no longer likely for the target to be met

  • Note that any selective disclosure made to third parties often ends up in online blogs, message boards or other social media websites

Keep Social Media Disclosure Factual and Balanced

  • Avoid the temptation to focus social media disclosure on positive information or to otherwise come across promotional. Social media disclosure should be factual and balanced, giving equal prominence to unfavourable news and favourable news

  • Ensure that social media disclosure is consistent with other more traditional disclosures

  • Be careful if providing copies of analyst reports and other third party news articles through social media. There are a number of securities law considerations here, and it is prudent to speak to legal counsel for specific guidance

Develop a Social Media Disclosure Governance Policy

  • Ensure that adequate governance policies and disclosure practices are in place. These policies and practices should apply to social media disclosure in addition to other more traditional disclosures

  • Consider the following items which the regulators suggest will be included in a strong social media governance policy:

    • Who can post information about the issuer on social media

    • What type of sites (including personal social media accounts vs corporate) can be used

    • What type of information about the issuer (financial, legal, operational, marketing, etc.) can be posted on social media

    • What, if any, approvals are required before information can be posted

    • Who is responsible for monitoring the issuer’s social media accounts, including third party postings about the issuer

    • What other guidelines and best practices are followed (for example, if an employee posts about the issuer on a personal social media site they should identify themselves as an employee of the issuer)

The CSA will continue to monitor social media disclosures by reporting issuers. Issuers falling short of these regulatory expectations may find themselves forced to take corrective action. For that reason, it is prudent for issuers to consider the regulatory guidance when making disclosures on social media.

You can read the CSA notice here.

DISCLAIMER: This post is intended to convey general information about legal issues and developments as of the date above. It does not constitute legal advice and must not be treated or relied on as such.