The operator of Australia’s primary securities exchange, ASX Limited (ASX.AX), has warned listed companies that they must monitor social media pages, such as Facebook (FB) and Twitter, regarding imminent important announcements.
While Kevin Lewis, compliance manager for the ASX, conceded that it is impossible to monitor social media entirely, each company should be monitoring investor blogs, chat sites, and any other areas on social media where the company is regularly mentioned.
A number of hoaxes have affected Australian companies over the last couple of years. Last July, shares in Australia’s second largest retailer, David Jones Limited (DJS.AX), skyrocketed by over 14% when the company revealed that a UK company had offered a $1.65 billion takeover bid. The following day however, shares fell by 10% amidst doubts about the legitimacy of the offer.
It was later revealed that a British blog site had named EB Private Equity (EBPE) as the bidder, of which no financial or management details could be found.
More recently, Whitehaven Coal Limited (WHC.AX) was the victim of a hoax by an anti-coal campaigner, who tricked investors into believing that ANZ (ANZ.AX) had retracted its $1.2 billion loan to the company based on ethical grounds. This hoax saw the company’s value fall by $314 million in early trading, before recovering later that day.
These two hoaxes are not the only examples, with social media posing more of a headache for companies around the world.
In the US, the Securities and Exchange Commission (SEC) recently released a set of guidelines that allow companies to disclose important announcements over Facebook and Twitter, but disallowed disclosure of information via LinkedIn or Google’s Google+ network. Whilst the guidelines that have been set are currently very broad, it is believed that these networks have been disallowed as they are not large enough, and the information would not reach enough people at the same time.
Whilst minor changes will be made by the ASX next month regarding the continuous disclosure rules, The Australian quoted Mr. Lewis as saying that “the underlying rules in relation to social media will not be changing”.
However, with the changes being allowed in the US, Justin Clark from FTI Consulting has suggested that other markets around the world, including Australia, will “demand the same channels as those of US-listed companies”, which would force the ASX to reconsider how disclosures are to be treated in the future.
It’s no secret that social media is a fast-growing trend, and it is exceedingly difficult to control or monitor everything that is posted. Furthermore, once information is posted, it is difficult (if not impossible) to reverse damages caused. Whilst there are currently no legally enforceable monitoring rules, companies that do not monitor social networks for false or damaging information risk falling victim to hoaxes or leaks in the future.
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