Canada's largest securities regulator is reluctant to follow its U.S. counterpart in allowing social media as a means for disseminating corporate news.
On Tuesday the Securities and Exchange Commission announced that companies listed on American exchanges are now legally allowed to release news through social media platforms such as Facebook and Twitter.
The OSC, however, says is doesn't have any plans to revise its current rules that specifically refer to social media, but it will keep an eye on what's happening in the U.S. and other countries.
That means the best way to release news in Ontario remains the traditional platforms, such as press releases and regulatory filings.
It's not that the OSC is hesitant to change. Just a few months ago, it adopted new rules on electronic dissemination that allows companies to post important corporate filings on their websites instead of sending them through snail mail to their shareholders. But it looks like the Commission is waiting to see what the social media rules play out in the U.S. first.
For those who want a refresher on Canadian disclosure rules, you can check out National Policy 51-201, specifically section 3.5.4. Referring to material news (rather than corporate filings), it says "posting information to a company's website will not, by itself, be likely to satisfy the 'generally disclosed' requirement. Investors' access to the Internet is not yet sufficiently widespread such that a website posting alone would be a means of dissemination 'calculated to effectively reach the marketplace.'"
In other words, putting material information on the CEO's Facebook page won't comply with Canadian law – which is what Netflix CEO Reed Hastings did to spark the SEC's review. Instead of filing a formal 8-K, Mr. Hastings told his followers that his company's online viewing exceeded one billion hours for the first time, assuming that he was legally disseminating the news to the public in the process.
The SEC ultimately ruled what he did was above board, but in the future companies must disclose which social media outlet investors should turn to as their official outlet for news.
(Tim Kiladze is a Globe and Mail Reporter.)
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