B.C. Securities Commission introduces new disclosure rules for stock promotional activities

The British Columbia Securities Commission has proposed new requirements — the first of their kind in Canada — that mandate companies connected to B.C. and which issue statements promoting investment in issuers of securities to make certain disclosures.

Such companies should disclose the issuer on whose behalf they are making the promotion, how much the compensation for the promotion is, whether the person making the promotion owns securities or derivatives related to the issuer, where the promotion is being conducted and other facts which would interfere with the objectivity of the one making the promotion.

These proposed rules seek to improve transparency in promotional activities and to help individuals more effectively evaluate the reliability of these promotional statements which often aim to drive up an issuer’s share price. Knowing whether the promoter has a financial or other interest will help individuals make more informed investment decisions, said Peter Brady, the commission’s executive director, in the news release.

The contemplated requirements will be applicable to all promotional activity regardless of platform or medium, including newsletters, financial blogs, emails, oral statements, social media posts or videos, as long as it has a real or substantial connection to B.C., subject to some exceptions.

The proposed rules are rooted in Securities Act amendments which vest the commission with more regulatory power over promotional activity and which enable the commission to regulate promotional activity regardless of whether it has been made by issuers, by shareholders or by third parties.

Other requirements will apply to venture issuers as defined in the proposed instrument. For a venture issuer that outsources promotions, it should issue a news release stating who it retained, the platforms used and the compensation paid and should publish an updated news release in the event of a significant change in this information. For a venture issuer with promotional activity that is over ten per cent of its annual total operating expenses, it needs to disclose those expenditures in interim and annual reports.

“Some companies have a legitimate need to engage in promotional activities and they should have no trouble complying with the proposed rules,” said Brady. “But abusive stock promotions are a scourge that go hand in hand with abusive trading, and the new rules would give us one more tool to tackle them.”

Interested individuals should provide their feedback on the proposed requirements by July 26, said the commission in its news release.