ASIC and ASX have both issued various warnings to
companies about the perils of social media, but the SEC seems more
open to it.
In recent times, Australia's corporate regulators have
demonstrated growing concern about the rise of social media and the
impact it has on the obligations that listed companies have to
immediately disclose material price sensitive information. ASIC and
ASX have both issued various warnings to companies about the perils
of social media, in particular, the need for companies to be aware
of what is being said about them on social media so that they can
properly comply with their continuous disclosure obligations. And
in the last week, they have reaffirmed their commitment to
announcements to the ASX being the primary channel for
communication of material price sensitive information.
In the US however, the Securities and Exchange Commission
appears to be much more open to embracing social media as a
legitimate channel for companies to distribute important company
information. Last week, the SEC announced that companies can use
social media outlets like Facebook and Twitter to announce key
information, provided that investors have been told which social
media channels the company intends to use for such purpose.
The SEC stated that "We appreciate the value and prevalence
of social media channels in contemporary market communications, and
the [SEC] supports companies seeking new ways to communicate and
engage with shareholders and the market."
Not so ASIC and ASX. Following the SEC's announcement, both
ASIC and ASX were very quick to point out that releasing material
price sensitive information on Facebook or Twitter would not be
acceptable in Australia. Of course, all that they were doing was
reaffirming their longstanding position that disclosure of material
price sensitive information by listed companies needs to be made
first by announcement to ASX, with any other channels for
disclosure that the company wishes to use (such as media, websites
or social media) being only a secondary channel for
ASIC also warned that even when using social media as a
secondary channel for communication, particular care needs to be
taken to ensure that the information disclosed was not misleading.
When a tweet is limited to 140 characters, the concern is that
disclosure by Twitter might lead to some important information or
qualifications being omitted. The preference would be to limit
tweets and Facebook postings to a notification that the company has
made an announcement to ASX, with a link to the announcement being
The SEC's announcement came following an investigation it
undertook in relation to the release by Netflix's CEO on his
own personal Facebook page of information regarding the
company's performance, in particular, that its online viewing
hours for the month had for the first time exceeded one billion
hours for the first time, when the company itself did not release
this information. While the SEC did not take any enforcement action
following this investigation, it did clarify its position on the
ability to use social media as a primary channel for communication
with investors, although it warned that it would not normally be
acceptable for companies to release important information through
the personal social media accounts of its executives.
So while listed companies in Australia are being held to
increasing standards in respect of their need to monitor what is
being said about them on social media, at least for now, they
cannot rely on social media as a primary channel for communication
of information to the market.
Clayton Utz communications are intended to provide
commentary and general information. They should not be relied upon
as legal advice. Formal legal advice should be sought in particular
transactions or on matters of interest arising from this bulletin.
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