Canada: SEC Issues Guidance On Company Use Of Social Media: Implications For Canadian Reporting Issuers

On April 2, 2013, the Securities and Exchange Commission (SEC) issued a report of investigation (the Report), which clarifies that companies may use social media platforms to announce material non-public information in compliance with Regulation Fair Disclosure (FD) as long as investors have been advised of which platforms will be used to disseminate such information.

BACKGROUND ON REGULATION FD

In 2000, the SEC adopted Regulation FD to combat selective disclosure by public companies to certain investors, which could give those investors an unfair advantage over other investors that did not have access to the new material information. On August 7, 2008, the SEC issued Commission Guidance on the Use of Company Web Sites (the 2008 Guidance), which clarified that a company makes public disclosure when it distributes information "through a recognized channel of distribution." Since the 2008 Guidance, and particularly in the last year, the use of social media by public companies and their insiders, executives and employees has triggered the SEC to issue additional guidance on the use of emerging technologies such as social media platforms for purposes of complying with Regulation FD.

Specifically, the Report stems from an investigation into a posting on Reed Hastings's personal Facebook page on July 3, 2012, announcing that Netflix had streamed one billion hours of content in the month of June. During the course of the investigation, SEC staff learned that there is uncertainty concerning how Regulation FD and the 2008 Guidance apply to disclosures made on social media platforms.

DISCLOSURE METHODS IN THE UNITED STATES AND CANADA

Regulation FD does not require the use of any one particular method of disclosing important non-public information to meet the "through a recognized channel of distribution" requirement, and the 2008 Guidance sets out some of the factors that can cause a company's website to constitute a recognized channel of distribution. This is notably different from the requirements applicable in Canada set out in National Policy 51-201 Disclosure Standards (NP 51-201), which require dissemination of all material non-public information by way of either (i) a press release distributed through a widely circulated news or wire service; or (ii) announcements made through press conferences or conference calls that interested members of the public may attend or listen to either in person, by telephone or by other electronic transmission (including the Internet), so long as the public is provided with notice of the date and time and other prescribed information relating to the conference or call by way of news release.

In the U.S., general disclosure can be satisfied if the company has made investors, the market and media aware of the channels of distribution it expects to use so that parties know where to look for disclosures of material information about the company. In Canada, the regulators have not yet adopted any equivalent to Regulation FD.

COMPANY-MAINTAINED SOCIAL MEDIA ACCOUNTS

Companies are increasingly maintaining social media accounts on Twitter, Facebook, LinkedIn and other platforms to reach shareholders, investors and stakeholders. While the 2008 Guidance was specifically directed at the use of corporate websites, these social media platforms are created, populated and updated by the issuer. The Report notes that "the ways in which companies may use these social media channels, however, are not fundamentally different from the ways in which the websites, blogs and RSS feeds addressed by the 2008 Guidance are used." The 2008 Guidance also commented on various interactive tools and "push" technologies such as email alerts and RSS feeds that are similar to the tweets and posts on social media platforms. Therefore, the Report suggests that the 2008 Guidance continues to provide relevant framework for applying Regulation FD to evolving social media channels of distribution.

In Canada, there is anecdotal evidence of a growing concern among issuers about the lack of guidance from Canadian securities regulators on use of social media platforms for disclosure. The current framework in Canada, while not specifically targeted at these social media channels, can still be applied to media such as Twitter and Facebook. Companies can use the guidance set out in NP 51-201 and the Electronic Communications Disclosure Guidelines published by the TSX as a framework for appropriate disclosure on company social media platforms.

INDIVIDUALS' SOCIAL MEDIA ACCOUNTS

Mr. Hastings's Facebook page is only one example of a growing number of insiders, executives and employees using social media to discuss company-specific updates and news. The Report states "... disclosure of material, non-public information on the personal social media site of an individual corporate officer, without advance notice to investors that the site may be used for this purpose, is unlikely to qualify as a method 'reasonably designed to provide broad, non-exclusionary distribution of the information to the public' within the meaning of Regulation FD."

While in the U.S. companies can take steps to bring an executive's personal social media account within Regulation FD by directing investors to those accounts, in Canada, the use of social media by executives for company-related disclosure increases the risk of selective disclosure by a reporting issuer. A simple tweet or post identifying an executive's current location could tip the marketplace to the potential for news of a pending transaction or a statement suggesting particular results could be determined to be selective disclosure by the securities regulators. Canadian reporting issuers would be unable to defend that executive in the way they might be able to under Regulation FD. Therefore, Canadian companies should determine their risk appetite and whether they feel it is appropriate for executives, insiders and employees to share company-related news via their individual social media accounts.

KEY TAKE-AWAYS

The Report is meant to clarify the application of Regulation FD to disclosures made by social media channels, and reflects the SEC's encouragement of companies seeking out new forms of communication to better connect with shareholders. Reporting issuers in Canada must be mindful that no equivalent to Regulation FD exists in the Canadian securities regulatory framework, and companies must continue to use traditional dissemination tools to satisfy the requirement to generally disclose all material non-public information. Companies may wish to ensure that their corporate disclosure policy sets up the appropriate mechanism for disseminating news such that dissemination on social media channels occurs after the news release is disseminated.

While an individual's social media account can be a recognized channel of distribution in certain circumstances under Regulation FD, no equivalent exists in Canada. Companies should also be aware of social media use by insiders, executives and employees. A decision should be made whether individuals may make company-related disclosures through personal accounts, and if such disclosures are determined to be permissible, companies should put procedures in place to mitigate the risk of selective disclosure. The use of a social media policy and appropriate training of individuals are some of the procedures a company may employ to mitigate such risks.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.