Lexpert magazine features articles and columns on developments in legal practice management, deals and lawsuits of interest in Canada, the law and business issues of interest to legal professionals and businesses that purchase legal services.
Issue link: https://digital.carswellmedia.com/i/854329
58 LEXPERT MAGAZINE | JULY/AUGUST 2017 Review Following a CSA review of social media practices of 111 reporting issuers, 30 per cent of companies surveyed took corrective action to improve their compliance, the regulator says in its staff notice. CSA con- cerns included: (1) selective or early disclo- sure to investors on social media platforms; (2) overly promotional content in social media postings or inconsistencies with duly disclosed information; and (3) insufficient corporate social media governance policies. "e regulator's position on social media has largely remained unchanged for well over a decade," says Matthew Merkley, with Blake, Cassels & Graydon LLP in Toronto. "I'm not saying there's a problem. But it bears reconsidering, at this point in time." He notes that the effect of 51-348 is to reit- erate long-established policy on disclosure and he says there has been no indication the CSA is contemplating an update. Lynn Hnatick, with MLT Aikins LLP in Saskatoon, says there are no new rules or regulations in SN 51-348. "It's an emphasis that those established rules do apply to so- cial media." While the regulator's position on social media may appear somewhat arbitrary, Will Van Horne, with McMillan LLP in Calgary, observes that CSA policy is informed, in part, by court decisions on insider-trading cases that have established standards for what is to be considered gen- eral disclosure of material information. Telus's Main sums up the CSA's message succinctly. "Everything has changed [tech- nologically], but all the [disclosure] prin- ciples remain the same." CSA policy on social media is defined by its 2002 statement in National Policy (NP) 51-201. To wit: "investors' access to the internet is not yet sufficiently widespread such that a Web site posting alone would be means of dissemination 'calculated to ef- fectively reach the marketplace …" Where internet access is concerned, the statement was arguably outdated when it was written — and 15 years later appears quaint, at best. e International Tele- communication Union says 62 per cent of Canadians had Internet access in 2002 (now 89 per cent), while Statistics Canada identifies about 13 per cent of Canadians as investors. Consider this together with the dispos- able income requirements of both investing and computer ownership, and it appears highly likely that nearly all investors were to be found among internet users in 2002, to say nothing of penetration rates today. Aer all, it's hard to imagine a day trader without an internet connection. The Truth Is Out There Still, SN 51-348 serves to address an impor- tant question — that is, whether internet access and securities disclosure are, in fact, related concepts. In NP 51-201, the CSA talks in terms of information push. "Push," they say, is when an issuer takes the initiative to place infor- mation before the public via a news release. Information "pull" is when the public is re- quired to search out information and pull it from online sources. In this construct, pushing information to the public in a press release equals proper disclosure, while leaving investors to pull information from the infinite, uncharted and endlessly frag- mented internet is a hit-and-miss proposi- tion that fails to meet the disclosure test. "Fragmentation seems to be the evil they're trying to cure," Van Horne says. "On the Internet, there are millions of places you could put that [disclosure] in- formation. rough traditional channels, everyone knows where it is. It just brings a little more certainty to the marketplace." Or, to put it another way, knowing the truth is out there is not the same thing as knowing the truth. e first principle of securities regulators everywhere is that, if a company is going to offer debt or equity to the public, it has a duty to provide com- plete, accurate, timely and unbiased infor- mation on all matters that are material to its business — and to provide it to all inves- tors at the same time. In light of this regulatory imperative, a certain crusty disdain for the preferred mi- lieu of celebrities may well be justified. But there's equally no doubt that increasing numbers of listed companies are embracing social media for their own reasons. SABRINA ROYER > BENNETT JONES LLP Initially, companies used social media as a marketing tool, but it's become more commonplace to use it as a customer- and investor-outreach tool. ILLUSTRATION: SHUTTERSTOCK | IN-HOUSE ADVISOR: SOCIAL MEDIA DISCLOSURE |