Legal Insights

Continuous disclosure and social media - new monitoring obligations

By Norman Lucas, Andrew McNee

• 20 June 2013 • 2 min read
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The changes to the ASX Listing Rules 3.1-.1B and Guidance Note 8 which concern listed entities' continuous disclosure obligations came into effect on 1 May 2013. Some of the interesting changes to Guidance Note 8 reflect the impact of social media on market availability of information.

Guidance Note 8 now provides that if a publicly listed entity decides not to request a trading halt or voluntary suspension to prevent the market trading ahead of an announcement, the ASX would strongly encourage the entity to monitor, amongst other things,

any investor blogs, chat-site or other social media it is made aware of that regularly posts comments about the entity …

… for signs that the information to be covered in the announcement might have leaked. If it detects any such signs, the entity should contact the ASX immediately to discuss whether it is appropriate to request a trading halt.

Similarly, if an entity is negotiating a market sensitive transaction, the entity should be monitoring social media for signs that information about the transaction may no longer be confidential. A draft letter to the ASX requesting a trading halt and a draft announcement about the negotiations should be ready to send to the ASX to cater for that eventuality. As the ASX warns, the closer the transaction gets to conclusion, the higher the risk of leaks and the more diligent that monitoring should be.

This new monitoring obligation does not require listed entities to scour the web for possible leaks. The Guidance Note gives the example of "shareholder action" blogs that exist for some listed entities, and which those entities tend to monitor anyway. This means that publicly listed entities should have processes in place to monitor social media and other relevant blogs or chat sites which are known to regularly discuss the relevant entity.

Questions for publicly listed companies to consider:

  • does your organisation have an employee monitoring social media? Are they qualified to do so?
  • what sites or blogs are being monitored?
  • is there a social media crisis plan in place? Are the relevant decision-makers (e.g. board members and senior management) in the organisation aware of it?

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