While a company’s website can host a wealth of information and form a key part of an investor relations strategy, managing that information also poses unique challenges. These challenges are heightened for resource issuers given the additional disclosure obligations under National Instrument 43-101 Standards of Disclosure for Mineral Projects that apply to technical or scientific disclosure. In particular, companies should carefully consider how their disclosure obligations under securities laws generally, and NI 43-101 in particular, are impacted by third party information that is republished or linked to from the company’s website.
NI 43-101 provides a comprehensive code governing disclosure of scientific or technical information by resource issuers. Under the Instrument, “disclosure” includes any written or oral disclosure made by or on behalf of the issuer that is intended to or reasonably likely to be made available to the public in Canada, and “written disclosure” is specifically defined to include any “writing, picture, map or other printed representation whether produced, stored or disseminated on paper or electronically, including websites.”
While it may be a matter of interpretation as to what constitutes “disclosure by the issuer” under NI 43-101, recent experience suggests that securities regulatory staff are increasingly taking the view that re-publication or posting of, and even hyperlinking to, third party information makes that document or information subject to NI 43-101 compliance. This includes analyst reports and media coverage, but could arguably apply to any type of third party information that is directly re-published on the company’s website or accessible via hyperlink. Beyond the risk of non-compliance with NI 43-101 and a delay in completing a financing, re-publication (and possibly linking), may also cause reputational harm, and worse, could subject the company to liability where the third party content is misleading or inaccurate.
Public companies should generally assume that their corporate website will be scrutinized if the issuer becomes subject to a continuous disclosure review or files a prospectus. For resource issuers in particular, it appears that securities regulatory staff will review all materials published and hyperlinked from the company’s website for NI 43-101 compliance, including third party materials such as analyst reports (which are also specifically addressed in National Policy 51-201 Disclosure Standards). It is also not uncommon for issuers to be faced with questions regarding re-publication of or hyperlinks to third party information in the context of prospectus financings, and for regulatory staff to delay clearing the issuer for filing a final prospectus until the offending information is corrected or the link is removed. We have seen several instances of this in the recent past. Moreover, the company may also be required to issue a press release stating that it has been required to correct and/or remove third party information from its website at the request of the regulator which, from a reputational perspective, is of course less than ideal. On that note, a review of an issuer’s website should, in our view, form part of the standard due diligence review that an underwriter would conduct in connection with a financing.
As discussed by our colleagues in their post on the Supreme Court of Canada’s recent decision in Crookes v. Newton, Canada’s top court has held that simple hyperlinking will generally not constitute “publication” for the purposes of the tort of libel. The majority compared a simple hyperlink to a footnote or other similar reference, finding that liability should generally only flow where the hyperlinked content is repeated. However, it is worth noting that two of the nine justices reasoned, in their minority decision concurring in the result, that liability should also flow where the text indicates adoption or endorsement of the hyperlinked content, even if the content is not actually repeated. This decision involved the issue of whether a simple hyperlink constitutes “publication” (not disclosure), in the context of a defamation claim. Recent experience suggests that, in the view of securities regulatory staff, information that is linked to from an issuer’s website will be considered to have been “disclosed” by the issuer, at least for NI 43-101 purposes. While it remains to be seen whether securities regulators would attempt to broaden the scope of the decision in an enforcement proceeding, the minority’s views may be instructive when considering the potential liability for issues of website and third party disclosure.
Public companies would be well advised to ensure their corporate disclosure policies include appropriate guidelines governing website disclosure. This includes guidelines on the type of information that will be published (like the company’s SEDAR filings, press releases, etc.), as well as the company’s policy on re-publication or posting of, and hyperlinking to, third party information. The risks associated with re-publication or hyperlinks should be carefully weighed against any perceived benefits. In all cases, the company should consider obtaining express permission to re-publish, clearly attributing the information (views, opinions, etc.) to the author, and disclaiming any responsibility for the content. These and other precautions are suggested by the TSX in its Electronic Communications Disclosure Guidelines, which also advises that re-publication should not be selective and cautions that posting an analyst report may be seen to endorse the content and could give rise to an obligation to correct the report if the content is, or becomes, misleading. Similar precautions should also be applied to hyperlinks, including the use of disclaimers advising that the reader is leaving the company’s website and that the issuer is not responsible for the content that the reader is being redirected to. Generally, third party information should only be republished with caution and, given recent experience, resource issuers should also carefully review all third party information on or accessible from its website, whether re-published, posted or hyperlinked, to ensure NI 43-101 compliance.