Law Times

Law Times • augusT 7, 2017 Page 11 www.lawtimesnews.com Social media use should comply with securities law BY MICHAEL MCKIERNAN For Law Times C orporate lawyers say reporting issuers need to work securities law compliance into their social media policies after a re- port by the Canadian Securities Administrators found short- comings in online disclosure practices. CSA Staff Notice 51-348 looked at the use of platforms in- cluding Facebook, Twitter, You- Tube, LinkedIn and Google Plus by a sample of 111 listed compa- nies and their representatives. The review found that just 23 per cent had a specific gov- ernance policy that addressed their use of social media. A further 30 per cent had general disclosure policies that touched brief ly on social media sites, but that still left almost half of the surveyed issuers with no governance policy at all on the matter. Barbara Hendrickson, found- er of BAX Securities Law in To- ronto, says she's certain the CSA will be keeping an eye on the is- sue in the future, given the con- tinuing growth in popularity of the platforms. "You need to have a social media policy and you need to enforce it," she says. "It should address things like selective disclosure and perhaps even have prohibitions that stop employees from posting certain information on social media platforms without permission or clearance. "As enforcement activities start coming up, I think all issu- ers will start looking closer and making social media a standard part of their corporate gover- nance documents," she adds. Sabrina Royer, a corporate lawyer with Bennett Jones LLP in Vancouver, says the CSA re- port is timely. "Based on how dynamic the area is, I'm not surprised some issuers are having problems. They need to be aware of the limitations of some social media forums," she says. "This is a pretty new area, es- pecially when it comes to its use as an investor relations tool." Michelle Vigod, partner in the corporate and commercial practice group at Goodmans LLP, says while many issuers are likely to have social media guidelines already in place, company accounts tend to fall under the control of the mar- keting department, whose goals and concerns do not always match up with her own. "The people who are put- ting up the Facebook posts are not necessarily the people who know the details of securities law disclosure requirements," she says. "From what I've seen, social media policies are conceived more in terms of appropriate usage and making sure that em- ployees are putting out a con- sistent message. They're not so much focused on securities law compliance." Vigod says she encourages clients to open up a line of dia- logue between the compliance and marketing arms of the busi- ness when developing policies for social media use, and she says the CSA report is a good re- minder that regulators are tak- ing the issue seriously. "Social media is a great tool for outreach to customers and potential investors, but I think some issuers didn't realize that it's a component of the business that may be taking them offside in terms of their disclosure," she says. "The organization needs to be aligned from top to bottom in its approach." The informal nature of many social media platforms can of- ten make them unsuitable for the sometimes-onerous disclo- sure requirements imposed on issuers, Vigod says. That's particularly true of Twitter, where the 140-character limit requires a short and sweet approach to posts. The authors of the CSA re- port noted that the proportion of corporate disclosure occur- ring on chat rooms, blogs and social media is on the rise as the internet has taken a central role in how the world communicates information. "Reporting issuers must con- stantly be aware of the securities reporting obligations that their social media activities may trig- ger, even if these activities are not directly intended to com- municate with investors," they wrote. In addition to insufficient policies, the CSA expressed concern with selective or early disclosure of material informa- tion to some investors via social media that was not also issued generally to investors, as well as posts that put a misleading spin on information so that it fails to line up with the official version already released on the central System for Electronic Docu- ment Analysis and Retrieval. According to the review, se- curities regulators called out 44 per cent of the issuer sample, which included companies op- erating in Alberta, Ontario and Quebec, for at least one instance of potentially non-compliant social media posts. Three out of 10 companies in the whole group took corrective measures ranging from, at one end of the scale, commitments to improve their social media disclosure practices. At the oth- er extreme, around 13 per cent of the sample were forced to de- lete the offending posts or file clarifications on SEDAR. Jason Saltzman, a partner in the Toronto office of Borden Ladner Gervais LLP, says much of the report is simply a restate- ment of basic disclosure prin- ciples, something he expects larger issuers to have a better handle on already. "Social media disclosure is fine so long as you do it the right way. It's still a public disclosure, and there's no reason to treat it any differently to one made in the regular way, which means you can't be selective or mis- leading," he says. LT FOCUS Michelle Vigod says 'people who are put- ting up the Facebook posts [for companies] are not necessarily the people who know the details of securities law disclosure requirements.' Medico/Legal Your case is too important. You deserve the right EXPERT WITNESS. We offer unparallelled expertise for your most catastrophic injury cases. Direct access to hundreds of specialists from all areas of healthcare expertise. A top provider of cost of care reports for your most catastrophically injured clients. More than 2,000 malpractice, personal injury and class action cases. More than 300 lawyer clients assisted. Serving lawyers across Canada. Also, the United States, United Kingdom, Australia and Caribbean. 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