Are Investor Bulletin Boards Damaging Your Business?

The Basics

Can an individual be sued if they post unacceptable content online?

Yes, if the post is defamatory. Normal rules of defamation apply to bulletin boards, blogs, posts and social media such as tweets, just as they do to any other written statements.

What statements will be considered defamatory?

Broadly speaking, something which is a derogatory statement that tends to make ordinary people think badly of you or your company and is not true and is not just a statement of honest opinion. For businesses, the statement must have caused serious financial loss or be likely to cause serious financial loss.

A good example of such a case is Gulf Keystone Petroleum Limited v Spencer Freeman (HQ12X01817).

Mr Freeman made various untrue comments about Gulf Keystone on Twitter. These included statements that the company had sold one of its main assets and hidden this fact from shareholders and that the company was about to undertake a placing of shares at below market value. The false allegations made by Mr Freeman were picked up by other Twitter followers and repeated on Interactive Investor and ADVFN.

Memery Crystal LLP, on behalf of Gulf Keystone, issued an application for an urgent injunction (www.theguardian.com/technology/2012/may/17/twitter-court-fantasy-oil-firm). The case was settled with Mr Freeman undertaking never to repeat the defamatory statements or any similar statements. Damages were also recovered.

Tips for dealing with damaging bulletin board posts, blogs, posts, and social media comments:

Tip 1 – Have a policy Every company should have an agreed policy for dealing with bulletin boards posts and social media.

Few companies will decide to monitor all bulletin boards or social media on an ongoing basis. The sheer volume of bulletin board posts, blogs and social media commentary makes constant monitoring an impractical solution.

However, it is sensible to monitor posts at sensitive times for the company. Examples of such times might be in the event of a shareholder campaign to remove directors, where the company is in confidential talks to sell its business or after a particularly difficult regulatory announcement which is likely to give rise to adverse comment.

Tip 2 – Accept that your company and the Board will be criticised  Do not seek to prevent all negative comment. Not only is this impossible but, particularly in the case of posts by shareholders, it can be highly counterproductive. No company wants to be known as a company that tries to silence all criticism of its management. This may lead to further negative commentary on the company.

Remember too that most internet chat is likely to be at least in part the expression of an opinion. The law recognises that shareholders and other bloggers have a right to express their opinions freely. Provided that the facts on which they are commenting  are broadly true and their opinion is genuinely held, even if their opinion is  prejudiced or irrational, they are likely to be able to rely on a defence of “honest opinion”.

Any company policy should include, in broad terms, where the company is going to draw the line on comments it will let go, even if inaccurate, and those which it will decide routinely to take action on. For example, general complaints about Board members’ conduct are routine on ADVFN, Interactive Investor and LSE. However, allegations of dishonesty, insider trading, misleading shareholders or financial instability are another matter, which should not be allowed to stand.

Tip 3 – Keep a paper trail If you have particular sites or individuals posting negative comments about your company it is important to keep a record of their posts. The internet is a very transitory medium and content may be removed. If you are looking to take action or build a case against someone, always print hard copies of all posts as soon as you become aware of them.

Tip 4 – For the most damaging statements, go direct to website operators In certain cases, posts may be unacceptable and very damaging. Whilst you might be tempted to instruct a solicitor to fire off a letter to the offending author (if you can identify them), by far the best course of action, in terms of immediate damage limitation, will be to contact the website operator (Interactive Investor, ADVFN, LSE etc.) and seek the immediate removal of the offending posts.

Website operators are not generally liable for the content posted by third parties on bulletin boards, shareholder forums etc. However, this all changes once they have been notified of the offending posts.

Generally speaking, you can expect a website operator to remove any posts you complain about, sometimes in a matter of hours.

A website operator will typically contact the offending poster about your complaint. The poster would also usually receive a warning from the website operator but is unlikely to be banned from using the website for only one offence. If the poster reoffends, you may be able to have him banned from posting by the website operator. However, this may not be a permanent solution because website users can often open new accounts and post under new usernames.

Tip 5 – Consider suing serious or repeat offenders As a result of the ease with which posters can open new accounts under new user names, for a serious or repeat offender, legal action may be the only effective solution against serious repeat offenders.

If successful, you can expect to recover damages, legal costs, an apology and a permanent injunction preventing repetition of the defamatory allegations or similar allegations.

Tip 6 – It is usually possible to find out the true identity of an offending poster Most usernames will not reveal the identity of the poster.  Furthermore, for Data Protection Act reasons, website operators will not disclose this information to you without a court order.

However, it is generally possible to obtain this information by a court order, known as a Norwich Pharmacal Order.  This is a relatively straightforward and low cost procedure.

However, occasionally, the individual will have given false information to the website operator when registering as a user, which will make tracing their identity more difficult.

Tip 7 – Think carefully about the pros and cons of taking legal action As well as taking legal advice, consider the following questions: (i) How much financial damage could the continued publication of the offending allegations cause to the company? (ii) Will shareholders expect the Board of Directors to take steps to make an example of an offending individual in the circumstances? (iii) Will legal action cause attention to be focused on a damaging allegation which has already been forgotten? (iv) Do you have any weak points in your case that you would not want to come out in court? (v) Is the current high level of postings by the person concerned likely to be a spike caused by particular short term circumstances the company is going through or are they a longer term problem? (vi) Is the potential defendant going to be able to pay damages and legal costs if the company is successful in its claim?  And is this a crucial issue in the overall context of the allegations?

Tip 8 – Consider whether posts are being used to try to manipulate the company’s share price Not all posters are motivated simply by expressing their views.

There is a category of posters on bulletin boards whose real aim is to artificially deflate and inflate the price of shares in order to make a profit. The real purpose of critical posts may therefore be to depress the share price so that they can acquire shares more cheaply. Conversely, “rumours” of a takeover may lead to a substantial short-term increase in the share price.

It is a civil and criminal offence under the Financial Services and Markets Act 2000 and Financial Services Act 2012 to deliberately make misleading statements/disseminate false information about shares with a view to affecting the share price.

If you suspect this is a poster’s real motivation, you should immediately report them to the Financial Conduct Authority (“FCA”).

Conclusion

Managing online reputation is a serious issue for companies and it is important to actively decide on a policy to manage online reputation issues. This may include some monitoring of bulletin boards and websites at particularly sensitive times for the company.

Removal of offending posts by the website operator is often a fast and pragmatic solution to reputational damage.

In extreme cases, legal action is available to silence wrongdoers. It takes guts and determination to see a defamation action through. However, increasingly, shareholders expect Boards of Directors to take a proactive approach to protecting a company’s reputation, including legal action against derogatory and often downright fictitious allegations.

Ironically, in this age of shareholder activism, it may well be the shareholders themselves whose voices are the loudest in their demands for legal action against the rogue elements in their own ranks who step out of line.

Jane Marsden
Ryan Lynch