Isn't social media misleading

Newsletter Capital Markets and Banking Law Issue 2 | 2020
Risk of market manipulation via social media

In the recent past, several statements from decision-makers in listed companies have led to government investigations into market manipulation. Netflix founder and CEO Reed Hastings announced on his Facebook page in around 2012 that subscribers had watched more than a billion hours of internet television in a month for the first time, with more than 2.5 million followers from a blog on Twitter (the Netflix price increased by 15% as a result). Elon Musk's announcement of a possible delisting of Tesla via Twitter led to a price increase of 11% for the Tesla share in 2019. Both statements led to investigations by the American regulator SEC.

The Market Abuse Ordinance (MAR) also recognizes the increasing importance of social media for the capital markets. So it says in the 48th recital of the MAR: "As the use of websites, blogs and social media increases, it is important to clarify that the dissemination of false or misleading information via the internet, including through social media websites or anonymous blogs, is considered equivalent to dissemination via more traditional communication channels for the purposes of this Regulation should be.

The Market Abuse Regulation prohibits information-based market manipulation. This includes the "Dissemination of information through the media, including the Internet or by any other means, which gives false or misleading signals as to the supply or price of a financial instrument [...] or the demand for it, or which is likely to do so, or an abnormal or artificial price level of a financial instrument [ ...] or where this is likely. ” This complex definition is comprehensive with regard to the communication channel (arg "or in another way, ...") and, to put it somewhat simply, prohibits the spread of false or misleading facts or rumors with a potential price influence. The “perpetrator” does not even have to act deliberately.

Verbund boss Wolfgang Anzengruber has learned firsthand that the FMA does not shy away from punishing prominent managers for information-based market manipulation (see VwGH December 18, 2015, Ra 2015/02/0200). In a "Kurier" interview on September 18, 2012, when asked whether the listed company would exit Turkey, I replied: "This is currently not an issue", although Verbund was negotiating an asset swap with E.ON in this regard (According to reports, however, the negotiations were suspended at the time of the statement.) Musk had tweeted regarding the Tesla-taking-private "Funding secured. ”, Although the financing was probably not guaranteed. Both cases ended with penalties by the supervisory authority (FMA / SEC). The medium (daily newspaper / Twitter) makes no difference here. In its annual report, BaFin also emphasized that new communication channels (Twitter, Facebook, etc.) also bring new fields of work for BaFin. BaFin also points out that it is currently investigating the first cases of new types of market manipulation digitally.

With this in mind, it cannot be overemphasized how important it is for decision-makers in listed companies to deal carefully with social media. In this context, we also advise compliance officers to keep their eyes open and create awareness in the company. In any case, only certain facts should be published. In addition, it must be kept in mind that the situation can often change very quickly in complex, extended issues. The supervisor then naturally looks back during their investigations and does not necessarily believe you that when you made a statement you could not have known that it would later turn out to be wrong.

Dr. Sebastian Sieder