Recently, a publicly listed cannabis client asked for our advice about using a third-party service that would automatically curate cannabis sector-related content and post it to their social media accounts. The client was looking to generate a constant flow of content to engage and attract new followers, but the lack of vetting and oversight raised serious concerns.
While Canadian companies have been generally slow to embrace social media for communicating to the market, the rise of the cannabis sector, and the much more promotional nature of many of the companies in the sector, have changed the rules of engagement. Many, eager to attract attention and differentiate themselves, have leveraged social media to cost-effectively share their story with a potentially much larger audience. But disclosure concerns abound.
Unlike in the U.S., social media is not an approved channel in Canada for publicly traded companies to communicate new material information to the market. That means companies who use social media must be hyper-aware of the potential for improperly disclosing material information.
They need to be cognizant of a number of pitfalls, including sharing partial content that does not provide balance or the full story, and sharing third-party content that includes material or forward-looking information about their company, but that has not been properly disclosed by the company first.
When it comes to sharing third-party authored content to a public issuer’s social media accounts, it is important to recognize the following:
- Sharing an article that includes forward-looking information about your business implies an endorsement of the author’s opinion, which may make your company legally responsible for the content even though you did not originate it;
- Likewise, sharing a sell-side analyst’s estimates, target price or recommendation implies an endorsement of said content, with similar liability concerns;
- Sharing a third-party article or analyst report establishes a dangerous precedent, as it may obligate your company to post all subsequent updates, good or bad, that may be published by that source.
As a best practice, we recommend:
- Sharing only third-party authored content that has either been prepared on behalf of the company or is general, and non-forward-looking, in nature;
- That all automatically curated content be reviewed before being posted;
- That any content meant to be automatically published in coordination with a material news release be only triggered by newswire dissemination (to avoid accidental posting in the event a news release fails to go out on time);
- That all social media posts be reviewed by someone knowledgeable of disclosure regulations, including familiarity with National Policy 51-201, Disclosure Standards, and National Instrument 51-102, Continuous Disclosure Obligations, and, for issuers listed on the Toronto Stock Exchange, the timely disclosure provisions of the TSX Company Manual and the Electronic Communications Disclosure Guidelines published by the TSX.
If planned and implemented correctly, the use of social media can add a lot of value as part of a comprehensive investor relations and corporate communications program.
However, with all of the benefits and promises of social media, public companies need to recognize the potential consequences, specifically with regard to regulatory issues. Our team at National Capital Markets can help your company implement social media communications as part of your overall investor relations program, effectively attracting new audiences to your investment story. Rather than recklessly and automatically curating and posting content that hasn’t been reviewed, we’ll help you plan and implement the sharing of your story while staying onside with disclosure regulations.