When a picture tells a thousand words . . .

That picture probably isn’t an emoji, because emojis aren’t detailed enough for a message of that size. But they do convey some information, which is why, we assume, people use them. And since emojis are capable of conveying information, they are also capable of conveying misinformation, even misleading information that violates the securities laws.

For some time, we’ve been discouraging our clients from using emojis or other images that could be misleading. Rocketships and unicorns have long been on our “bad words list”.

But a recent court case got the attention of some of our clients. It’s not a case about emojis, rather it’s a classic “are these things securities?” case. But in determining whether something is a security, the court has to establish whether there was, among other elements, an “expectation of profits.” In this case, the defendants never literally used the word “profit” in their marketing materials but used the “rocketship,” “stock chart” and “moneybags” emojis. The court found that these “objectively mean one thing: a financial return on investment.”

So emojis can, according to the court, represent statements of fact. It would be wise to assume that they could also be statements that could be held to be materially misleading in the context of a securities offering. A rocketship and a unicorn next to a mention of financial results, for example. Issuers should consider the use of emojis (whether by them or their marketing agents) and adopt procedures to make sure nothing is “said” without carefully considering the message, including running those communications by securities counsel.

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