RE-TWEETS on Twitter and “Likes” on Facebook may be endorsements of third-party content under securities laws, according to draft guidance published by the self-regulatory Investment Industry Regulatory Organization of Canada (IIROC).
The IIROC guidance echoes a similar policy adopted last year in the United States by the Financial Industry Regulatory Authority (FINRA). Under its guidance, FINRA broadened the US Securities and Exchange Commission’s “adoption” theory on third-party content to include re-tweets and likes.
While both the IIROC and FINRA guidance is specific to investment dealers and their employees, the policies likely will influence how regulators and possibly the courts view the same activities by public companies on their social media accounts.
Companies endorsing share price targets
It’s quite common for companies to post, re-tweet or indicate approval of third-party content on their social network accounts. These are often innocuous activities, but occasionally they involve third-party reports about companies’ investment merits and even specific share price targets.
By forwarding or simply liking a post, companies could be seen as endorsing the content, including any commentary about the company’s future stock price. Investors who buy the company’s stock based on the company’s endorsement could conceivably sue the company if the stock fails to reach the stipulated price.
If they are not already doing so, investor relations departments should be regularly reviewing their companies’ social media activities to identify potential compliance issues as well as proactively educating social media staff about potential securities law pitfalls.