Over the last several years, mining issuers in Canada have started to integrate the use of social media such as Facebook, LinkedIn and Twitter into their marketing and client communications. This update outlines the application of existing securities law in Ontario to social media communications by reporting issuers, and offers some helpful guidelines for resource-focused public companies implementing a social media strategy.

CSA Staff Notice 31-325

The Ontario Securities Commission (OSC)’s only comments to date on social media are contained in CSA Staff Notice 31-325 –Marketing Practices of Portfolio Managers (SN 31-325). Although this communique only relates to registered portfolio managers, it may be a useful starting point for the OSC if it were to address social media issues arising in other areas of securities regulation.

In SN 31-325, the OSC recognizes the growing use of social media by portfolio managers to market their business activities and communicate with clients. The OSC states its expectation that firms and registered individuals comply with applicable regulatory requirements and securities legislation in their use of social media outlets. In so far as it applies to reporting issuers and their insiders, SN 31-325 recommends that firms consider establishing policies and procedures for the review, supervision, retention and retrieval of materials on social media web sites and designate an appropriate individual at the company level to be responsible for the supervision of web-based communications.

Ontario Securities Law

Resource issuers in Ontario are reminded that all public disclosure is governed by, and must comply with, National Instrument 51-102 – Continuous Disclosure Obligations, National Policy 51-201 – Disclosure Standards and National Instrument 43-101 – Standards of Disclosure for Mineral Projects, in addition to the disclosure rules of any applicable stock exchange.

Issuers must be careful not to post non-compliant information on their websites or through social media. The exact same rules and disclosure standards that apply to public filings also apply to information that an issuer posts or links to online. An issuer is deemed to “own” all information made available through its online presence, whether it’s filed on SEDAR or tweeted. Furthermore, it does not matter whether the issuer produces the content or merely provides a link to it; the issuer will be held responsible if the content in question breaches the disclosure rules. In particular, resource issuers must avoid linking or posting tweets, articles, or documents containing production rates, cost estimates or any other disclosure of potential economic outcomes related to their projects without having first established a current CIM (Canadian Institute of Mining)-compliant preliminary economic assessment.

Summary and Recommendations

Though the OSC has yet to provide comprehensive guidance on the use of social media communication for reporting issuers in Ontario, here are some helpful guidelines to assist resource-based issuers when posting or linking items on its website or through social media channels:

  1. Your website, Facebook, LinkedIn and Twitter accounts form part of your mineral disclosure record. The mining disclosure rules apply to all written disclosures, including both paper and electronic documents shown to the public. Investor presentations, fact sheets, and web site and social media posts about a project must adhere to all relevant disclosure rules.
  2. Establish Internal Controls. Issuers are encouraged to institute policies and procedures for the review, preparation and dissemination of materials on social media outlets and the company’s home webpage, and to designate a suitable individual to be responsible for such accounts to ensure compliance with securities law. This should be part of the issuer’s disclosure policy.
  3. Avoid promotional disclosure. The OSC requires all disclosure to be unbiased, and OSC staff may take serious issue with rosy language concerning a mineral project (such as “world class”). Under National Instrument 43-101, any mention of the potential size of an exploration target must be expressed as a range of tonnes and grade, and must be grounded in geological reality.
  4. Include cautionary language. Both exploration targets and historical estimates must be put into context. To do this, issuers must include cautionary language any time a historical estimate is quoted in a disclosure document. Additional requirements apply when projects progress to the mineral resource estimate stage. Any disclosure of potential costs, revenues, or cash flows is considered a “preliminary economic assessment” under National Instrument 43-101. Such disclosures must include prescribed cautionary language, and must be supported by a publicly-filed independent technical report.
  5. Establish Website Disclaimer. Add a noticeable link to a disclaimer on the issuer’s website which includes a cautionary statement on forward-looking information. A hyperlink to the disclaimer can be used in tweets and other social media where there are constraints on the amount of text being presented.

NOTE: This publication is intended to provide information to clients on recent developments in provincial and national law. Articles in this newsletter are not legal opinions and readers should not act on the basis of these articles without first consulting a lawyer who will provide analysis and advice on a specific matter.