On March 9, 2017, the Canadian Securities Administrators (CSA) published Staff Notice 51-348 Staff's Review of Social Media Used by Reporting Issuers (notice). The notice provides the results of the CSA's review of social medial disclosure by 111 reporting issuers on websites such as Facebook, Twitter, YouTube, LinkedIn and Instagram, as well as the issuer's own websites (including message boards and blogs).
The notice reinforces that issuers should be providing factual and balanced disclosure across all platforms of investor communication, including social media. Generally, the CSA identified three key areas where it expects issuers to improve disclosure practices: (i) selective or early disclosure of material information through social media; (ii) disclosure of information that is incomplete or inconsistent with previous disclosure on SEDAR; and (iii) insufficient social media governance policies.
Some of the issues raised by the CSA include:
- Failure to generally disclose. Selective disclosure, including forward-looking information and significant future milestones, on an issuer's social media alone is not considered "general disclosure". The notice indicates that issuers are expected to disseminate information via SEDAR or news release in addition to any social media channels.
- Lack of coordination between social media disclosure and general disclosure. The CSA noted instances where social media disclosure was followed by delayed general disclosure or no general disclosure at all.
- Overly promotional posts. The CSA noted instances where issuers posted commentary or other information on financial results that, in the individual or aggregate, was promotional or unbalanced enough to raise securities law concerns.
- Sharing analyst reports and other commentary. The CSA raised concern where issuers provided inadequate disclosure around analyst reports and other articles shared by issuers through their social media.
Issuers that do not comply with disclosure requirements in their social media practices may be required to take corrective actions.
Given the growing prominence of social media as a corporate communication tool, issuers are well advised to develop sound governance practices around their social media usage. In order to improve disclosure, issuers should consider the following:
- Institute a social media policy. The policy should delineate who can post, what type of information they can post, where it can be posted and whether approvals are required for posts.
- Establish "top down" social media practices. Management and directors should be kept aware of a company's engagement with its investors through social media and be familiar with the company's social media policy.
- Ensure employees that are involved with a company's social media initiatives are familiar with the disclosure obligations under National Instrument 51-102 Continuous Disclosure Obligations and National Policy 51-201 Disclosure Standards.
- Avoid unnecessary details, exaggerated reports and overtly promotional commentary. Find a balance between being "positive" and being "promotional and unbalanced".
- Ensure that social media disclosure is derived from previously disclosed information. If disclosure is made on social media but not generally disclosed, ensure that such information is not material to the company.
- If analyst reports or other third party articles are shared, ensure disclosure is made around the author and provide information as to which other analysts or third parties also cover the issuer.
The CSA has indicated that it will continue to monitor the use of social media by reporting issuers. As investors continue to access information and interact with companies through new and unique mediums, it is likely that these policies will continue to evolve and develop.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
