ASIC recommended that companies review social media posts before they were posted, as well as ensuring that employees using social media for marketing purposes be educated on compliance with the Corporations Act.

The recommendation came after researchers of a report, REP 494 Marketing practices in initial public offerings of securities, observed incidents which ASIC said had the potential to mislead investors.

Companies using social media generally did so to encourage people to access more information elsewhere, ASIC said, adding that most posts observed did not contain information sufficient to mislead investors.

“However, we saw isolated instances where social media posts on WeChat misstated the issuer’s financial position and ASIC’s role in the IPO,” the report said.

Other companies released videos featuring senior management discussing key facts about the IPO, videos the report said were usually filmed before lodgement of the prospectus and distributed afterwards.

The report recommended that firms ensure that video content was consistent with disclosure in the prospectus, and that it remained correct after any changes or updates were made.

This came after report authors identified two occasions where videos, used to promote the companies on platforms such as Facebook and LinkedIn, lodged a replacement prospectus to address an ASIC concern, but did not remove the same information from a video.

The study reviewed the online and social media marketing of 23 IPOs where a prospectus was lodged between October 2015 and March 2016, before reviewing the marketing practices and materials of 17 associated firms more closely.

ASIC found social media was only used occasionally by small to medium sized firms to market IPOs, with most companies preferring to use telephone calls, emails and websites to promote an offer to retail investors.

Report authors also observed some weaknesses in oversight in the use of telephone calls to promote IPOs, recommending that firms provide employees with standardised telephone scripts and regularly record and review calls to potential clients, noting that few companies currently did so.

Companies should also ensure that marketing was based on the benefits of the IPO itself and that access to information was controlled to ensure that potential investors based their decision on the prospectus.

Special care was also necessary in using forecasts to market IPOs and when targeting investors from a particular background, ASIC said, in order to ensure that communications were clear and accurate.