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Reporting Issuers and Social Media – A Strict Corporate Governance Approach

By: Hayley Silvertown | March 22, 2017

On March 9, 2016, the Canadian Securities Administrators (“CSA”) published CSA Staff Notice 51-348 (the “Notice”) which describes some of the concerns that arise when reporting issuers use social media as a public disclosure platform and engage with investors and other stakeholders.

The Notice highlights several findings by the securities regulatory authorities regarding disclosure on social media, such as Instagram, Twitter, Facebook, and LinkedIn, and also extends to issuers’ own websites. The concern was whether disclosure by reporting issuers via social media platforms was consistent with the principles outlined in National Policy 51-201 Disclosure Standards (“NP 51-201”) and considered issues such as unbalanced and misleading disclosure, selective disclosure and forward-looking information.

The Notice highlights three main issues for reporting issuers to be wary of:

1. Selective Disclosure on Social Media

Reporting issuers must ensure that any material information disclosed is generally disclosed in accordance with applicable securities law. While this strict requirement extends to material information disclosed on social media channels, NP 51-201 provides that information will not be considered to have been generally disclosed solely as a result of disclosing such information on the issuer’s website. Furthermore, information is not generally deemed to be disclosed for the purposes of NP 51-201 if only disclosed on social media.

Disclosing material information only via social media runs the risk of selective disclosure and therefore, only some investors may have received or been made aware of information relevant to the investment. Examples of selective disclosure includes any forward-looking information, such as the expected timing of significant milestones, revenue, earnings per share and cash flow targets. There is also a concern of time delays where information is released on social media prior to general disclosure on SEDAR or via news release. It is essential that reporting issuers ensure that general disclosure is made prior to disclosing material information via social media and that investors are provided with a reasonable amount of time to analyze the material information. 

2. Unbalanced or misleading disclosure on social media

NP 51-201 requires that disclosure by an issuer be factual and balanced – i.e. that there be a balance between favourable and unfavourable news and sufficient details must be provided to allow for investors to understand the substance and significance of the information. Issues arise where social media websites are overly positive and promotional and reporting issuers should take extra care to avoid any embellished and advertising content – such as using misleading or untrue statements on social media, where statements made are inconsistent with public disclosure on SEDAR or non-GAAP measures are used. Issuers should also take extra precautions to avoid citing and endorsing third-party disclosure regarding forward-looking events, without supplementing with proper clarification.

3. The importance of a social media governance policy.

The CSA found that many issuers did not have fulsome social media governance policies. It is important for reporting issuers to ensure that strong social media governance policies are place and that they are strictly enforced. This includes addressing issues, such as:

(i)  who can post information on social media;

(ii)  the types of sites that can be used and from what account (i.e. personal and/or corporate);

(iii)  the type of information about the issuer that can be posted on social media (e.g. financial, legal, operational, marketing, etc.);

(iv)  what, if any, approvals are required before posting information;

(v)  who is responsible for managing and reviewing social media accounts and third party posts concerning the issuer; and

(vi)  whether any other guidelines and best practices apply.  


Issuers should also be wary of unintentional consequences that can result from the improper disclosure of material information. Despite the channel used to disclose information, via social media or otherwise, reporting issuers must abide by securities regulations, which includes the stringent policies set out in NP 51-201 to remain compliant with securities laws. The CSA has begun to hold social media disclosure to a higher standard and accounts held by reporting issuers will be monitored closely to ensure that investors obtain all material information simultaneously.

 Tags: Corporate Governance, Regulatory Compliance, Securities Law



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