Social media can provide reporting issuers with a fast and efficient means for communicating with shareholders and is an increasingly popular means of disseminating information. Such channels are, of course, subject to the same rules as other corporate disclosure, although applying those rules to social media requires some careful consideration given the limited “sound bite” nature of a post and potential for increased risk of selective disclosure.
While Canadian regulators have not expressly addressed potential issues relating to disclosure through social media, general principles governing disclosure are set out in National Policy 51-201 Disclosure Standards. For TSX-listed companies, meanwhile, the TSX has published its own Electronic Communications Disclosure Guidelines, which cover online communications, generally. Staff of the Canadian securities administrators have also provided guidance on the use of social media by portfolio managers, while National Policy 47-201 Trading Securities Using the Internet and Other Electronic Means provides guidance on using the Internet to communicate in connection with trades and distributions of securities.
Until specific rules are adopted, social media is subject to the same requirements as disclosure generally. These include requirements relating to fair and balanced disclosure, broad access and no selective disclosure, as well as prior approval, review and retention in accordance with the company’s usual disclosure policies and/or practices.
Failure to appreciate the nuances associated with disclosure through social media may give rise to potential issues, including scrutiny from regulators as well as risk arising from less rigorous review and approval of the information posted.
An example of the potential issues emerging from the use of social media can be seen in the case of Netflix CEO Reed Hastings, who was investigated by the SEC for selective disclosure after posting on his personal Facebook page that Netflix had achieved a corporate milestone. The SEC ultimately decided not to pursue an enforcement action. Meanwhile in 2012, NASDAQ-listed Francesca Holdings terminated its CFO for improperly communicating company information via social media. His tweets included such missives as "Board meeting. Good numbers=Happy Board."
In order to distill the various rules and guidance, the following are high-level guidelines for reporting issuers to consider when using social media as an investor relations tool.
Principles to incorporate:
- Acceptable social media channels should be pre-approved along with parameters for content that seek to ensure compliance with applicable Canadian securities laws;
- Restrict authorization to post to these channels to a limited number of investor relations employees or disclosure committee representatives;
- Add the social media links that are approved investor relations channels on the corporate website and news releases so as to provide investors with broad-based and advance notice of where information may be available;
- Ensure that social media channels are unrestricted so as not to impede access to information (i.e. ensure Twitter feed is not set to private, avoid social media websites that require investors to be members);
- Maintain a consistent and balanced pattern of posting (i.e. if posting after earnings releases, do so whether results are good or bad);
- Post material information only after it has been disclosed via news release (exception: share offerings – see “Practices to be wary of”, below);
- Be particularly vigilant about social media activity during a securities offering (distribution);
- Post material concurrently on the corporate website;
- Hyperlinks to the corporate website, SEDAR or the company’s own marketwired releases are acceptable, but be wary of hyperlinks to third party material – see “Practices to be wary of", below;
- Hyperlinking to company or brand marketing materials regarding products or services is generally acceptable;
- Regularly monitor social media channels to ensure no breach of security; and
- Archive and retain all social media posts in accordance with the company’s retention policy.
Practices to be wary of:
- Hyperlinking to third party stories/reports/analysis;
- Using stock symbols or hyperlinking to share price information;
- Hyperlinks from company marketing or brand channels to investor relations channels (i.e. issuers generally should not drive consumer traffic to investor channels);
- Do not “sell stock”, including by avoiding links to news releases regarding share offerings;
- Scrutinize posts as you would other communication (while short, posts must be fair, balanced, accurate and cannot obscure/ignore unfavorable information); and
- Restrict employees from communicating in regards to company announcements/developments outside of approved channels.
The guidelines are intended to be a general guide and are not necessarily comprehensive. It should be noted, however, that these guidelines are intended to apply to social media channels (such as Twitter feeds) that focus on or include information in respect of investor relations, as opposed to channels or feeds focused on marketing, customer service or company information generally.