Even if a listed company has no interest in social media, last week’s final release of ASX’s Guidance Note 8 confirms that social media compliance is front and centre for Boards and C-Suites across Australia, whether they like it or not.
If listed entities want to keep confidential a pending market sensitive announcement or a close to final market sensitive transaction, they must now, among other things, monitor social media for signs information may have leaked. If there are leaks, an ASX announcement may have to be made.
So, what comfort does this offer to the CEO, Chairman or Board member addicted to their Blackberry or iPhone but with little interest in social media channels? The answer is: not much. ASX has pulled no punches in saying that entities need to introduce processes designed to activate approvals for market disclosure within minutes. Those processes cannot operate smoothly unless all senior stakeholders understand the rules of the game.
The Draft Guidance Note was criticised for imposing broad and onerous social media monitoring obligations on listed entities. Suggested improvements included limiting monitoring to “credible” or “well known” social media sources, with regard to the resources of the relevant organisation. This feedback has largely fallen on deaf ears.
There is not much for the naysayers in the final version, which only offers a limited concession that one need not trawl for every single investor blog or chat site likely to post comments about the entity, but can stick to reviewing those it is “aware of”.
The social media monitoring obligation imposed on entities does not stop there. Perhaps spurred by the ANZ / Whitehaven hoax which transfixed the market over the January holiday season, Guidance Note 8 confirms that corporations must stop rumours likely to lead to false markets, even if this is contrary to a normal ‘no comment’ position. As ASX states, such rumours can circulate in the market orally or via emails, blogs, bulletin boards, chat-sites, Facebook, Twitter or other social media.
This may mean that, despite protestations from ASX to the contrary, in practical terms companies have an ongoing obligation to monitor social media so they can respond to market rumours.
It’s now time for senior management and the Board to be tutored on the basics of social media sites such as Twitter, Facebook, HotCopper and other investor chat sites. At the moment, do decision makers know what these sites even look like?
Faced with a market rumour requiring a snap decision about potential disclosure or response, and given the delicate balancing act involved in this assessment, a competent understanding is needed of social media channels to assess practically whether a deal has leaked, or whether the rumour is just one of a “range of possibilities”.
Relying on someone else’s judgment may not be enough.
Further, query whether one can simply delegate the social media monitoring function to the ‘usual’ people. The skill set needed for a compliance review may be entirely different from that involved in monitoring social media for, say, marketing reasons.
There needs to be a fertile debate about whether compliance social media monitoring should be outsourced or undertaken in-house. After all, the compliance social media monitor may need to be brought into the circle of trust about market sensitive issues, understand relevant legal issues, have strong attention to detail, excellent judgment and discretion. This kind of social media monitor may need to escalate urgent potential issues to the company secretary. Trust will be important in this relationship.
Even more significantly, in the United States, The Federal Financial Institutions Examination Council (FFIEC) released in January 2013 its own proposed guidance note for social media which is far-reaching in scale. Intended to apply to financial institutions, the FFIEC proposes a seven point plan concerning social media starting with a social media governance structure sourced from senior management or the board of directors which establishes controls and ongoing assessment of risk in social media activities.
In similar vein, ASIC Commissioner John Price warned delegates at the 2012 CSA Annual Conference late last year, “any architect of a continuous disclosure compliance system needs to focus on…the importance of having adequate systems in place, especially in the age of social media”.
The FFIEC approach may signpost a future trend towards ‘top down’ social media regulation in which ASX Guidance Note 8 is but the tip of the iceberg. This means there is no better time to put one’s social media house in order than now.
This article is co-authored by Stephen Minns. The firm’s Chairman, Stephen is presently being tutored on his new Twitter account.
