‘Untrue’ disclosures hurting investors, CSA says
TORONTO Without naming names, Canada’s securities watchdogs warned Thursday that deficient company disclosures of “misleading and untrue” financials on social media “have resulted in material stock price movements and investor harm.”
The Canadian Securities Administrators (CSA) — an umbrella organization of the country’s provincial and territorial securities regulators — reviewed the social media disclosures of more than 100 public companies, and found that 77 per cent did not have policies to guide their disclosure practices online.
“We expect issuers to adhere to high-quality disclosure practices, regardless of the venue of disclosure, and encourage issuers to implement a strong social media governance policy,” CSA chair Louis Morisset, who serves as the president and CEO of Quebec’s Autorité des marchés financiers, said in a statement.
Among the concerns raised in the CSA’s analysis, published in a staff notice to its members, were a number of instances where misleading or outright false statements were published through social media websites such as Twitter, Facebook, YouTube, LinkedIn and Google+.
“We observed instances where the disclosure provided by issuers on social media was either untrue or promotional to such an extent that it could have misled investors,” reads the notice. “In several instances, issuers provided commentary or other information about their financial results on social media which did not appear to be consistent with or contained in their continuous disclosure on SEDAR.”
The notice adds that, in at least one case, misrepresentation occurred where figures posted on social media by a company had not been disclosed in any regulatory filings and did not follow Canada’s generally accepted accounting principles (GAAP).
The CSA undertook the review to see whether issuers’ social media posts adhered to nationwide policies that require they provide balanced disclosures and do not selectively disclose information or make misleading statements.
The review also found that, in some cases, companies selectively published forward-looking information including revenue, earnings per share and cash flow targets in online posts.