Most Read Contributor in Australia, September 2016
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
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
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.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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