Recently, a twitter hoax of an explosion at the White House (which was said to have injured the President) wiped $130 billion off the S&P 500 in just three minutes. The market bounced quickly, but this is a clear indication of the rapid effect that the dissemination of information via social media, including false information, can have on the market.
How should social media be managed by companies? Clearly social media information can be about a company and, therefore, impact on it, but companies can also use social media to manage the flow of information. ASX and ASIC are cautious about both.
ASX policy in Guidance Note 8 does not require a company to monitor social media at large. Rather, the ASX Guidance Note encourages entities that are yet to release sensitive information to monitor social media, investor-blog and chat sites that regularly post comments about the company. ASIC has repeated these comments and noted that they consider that it is good practice for entities, as part of their already existing investor relations activity, to consider monitoring well known social media feeds on a regular basis. So, in short, it's not formally mandatory under the actual Guidance Note to monitor social media at all times, but sometimes it will be necessary to. In all probability, the circumstances where it will be necessary to are likely to rise.
When a listed entity is to monitor social media, it is important that they engage the right person to do so. It is important that adequate training be provided to ensure anything within certain parameters or criteria be reported directly to management responsible for continuous disclosure compliance so as to allow the entity to make appropriate responses promptly to maintain market integrity.
On the other hand, what about the use of social media for market sensitive announcements? ASX and ASIC have reaffirmed that companies need to announce price sensitive information through the ASX before any announcement is made through social media. This is in contrast with the position in the United States. Last month the US Securities and Exchange Commission said that companies can use social media outlets (like Facebook and Twitter) to announce key information so long as investors have been alerted about which social media will be used to disseminate information. According to George Canellos, Acting Director of the SEC's Division of Enforcement, "most social media are perfectly suitable methods for communicating with investors, but not if the access is restricted or if investors don't know that's where they need to turn to get the latest news." This wider approach has not met favour with Australian regulators. Therefore, the initial announcement of price sensitive information for Australian companies needs to be made through the ASX. In respect of any subsequent announcement on the same topic, ASIC has noted that the announcement must not be misleading and deceptive, and care needs to be taken if there are a limited number of characters that can be used to make the announcement. The safest course of action is to simply include a link to the announcement.
With the dynamic nature of social media, the expectations as to how companies both manage and use social media will continue to be important for listed entities. As social media becomes ever more prevalent, the obligations, as well as, potentially, the opportunities, are likely to increase for companies.
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