VANCOUVER, BC, April 25,
2024 /CNW/ - The B.C. Securities Commission (BCSC)
issued a BC Notice today to raise awareness of a 2023
Commission decision about promotional disclosure, and how it must
be presented to comply with the law.
The decision, Re Stock Social Inc., interpreted a
Securities Act provision that investor relations
records must "clearly and conspicuously" disclose if they are
disseminated by or on behalf of an issuer or security holder. This
applies to promotional and marketing materials, including social
media posts by "influencers."
The BCSC panel's interpretation of the Act's requirement for
clear and conspicuous disclosure was the first of its kind in
Canada, and is binding on issuers
and promoters in B.C.
The panel said an investor relations communication that aims to
promote the purchase or sale of securities of a particular company
– or reasonably could be expected to do that – must disclose it was
issued on behalf of the issuer (when an issuer has engaged a person
to do this activity), and must be in plain language. For example,
the communication should say that it was "disseminated on behalf
of" the company, or is a "paid advertisement on behalf of" the
company.
The disclosure, the panel said, must appear in a prominent spot,
"at or very close to the beginning of" the communication, "or at
least close to the substantive portion." It "should not be buried
in legalistic standard terms and conditions that readers often
skip." It also must appear in a prominent font.
The disclosure should be designed to catch the attention of the
reader. A link to another website containing the required
disclosure requires readers "to take an extra step," the panel
said. A link to the required disclosure is ordinarily not
sufficient – it must be part of the communication.
The Stock Social decision found that the B.C. marketing company
and its CEO repeatedly violated the Act by not adequately
disclosing that it distributed advertorials and social media posts
on behalf of five companies involved in mining, technology and
cannabidiol (CBD) products.
The advertorials — which were disseminated on newswires,
websites and social media — were usually written like news articles
but did not disclose risks or any other negative factors about the
issuers that one would expect from objective reporting. None of the
advertorials made clear that they were on behalf of the issuers,
and although some indicated a fee had been paid for dissemination,
they did not say on whose behalf. When disclaimers did appear, they
were not placed in a prominent place for the reader to easily
notice.
"The Commission panel laid out specific expectations for the
level of clarity and candor it expects to see in promotional
material," said Brenda Leong, the
BCSC's Chair and CEO. "The integrity of our investment market
depends on that clarity and candor, because investors need to be
able to assess the objectivity of the information they're
receiving. Companies and promoters should be aware of these
expectations, which the BCSC will continue to enforce."
About the B.C. Securities
Commission (www.bcsc.bc.ca)
The B.C. Securities Commission, an independent provincial
government agency, strives to make the investment market benefit
the public. We set rules, monitor compliance by industry, take
action against misconduct, and provide guidance to investors and
industry. As guardians of B.C.'s investment market, we're committed
to maintaining a market that is honest, fair, competitive and
dynamic, enabling British Columbians to thrive.
Learn how to protect yourself and become a more informed
investor at www.investright.org
SOURCE British Columbia Securities Commission