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Issuer Regulation

Promotional Communications about Companies

Whenever you share information about a company that could encourage the buying, selling, or holding of the company’s shares or other securities, you must follow securities law.

This applies especially to:

  • companies, both public (“reporting”) and private (“non-reporting”),
  • anyone holding a company’s securities, and
  • anyone communicating on behalf of a company or a holder of securities.

Public companies must also comply with the rules for communicating that are set by their exchange.

  • Communications that Must Follow Securities Laws
  • Communications Must Not Be Misleading
  • Exaggerations and Unbalanced Statements
  • Future Events (“Forward-Looking Information”)
  • Potential Conflicts of Interests
  • Financial and Technical / Scientific Information
  • Communications about Certain Companies
  • Checklist
  • Resources

Communications that Must Follow Securities Laws

Even if you do not recommend outright the buying, selling, or holding of securities, you may still be engaging in “promotional activity” or “investor relations activities”.

(If you are making recommendations, further requirements may apply – this could include "registration”, which is explained here).

Promotional activity includes any activity that, by itself or together with one or more other activities, encourages or reasonably could be expected to encourage a person to purchase, not purchase, trade, or not trade a security.

Investor relations activities are any activities, by or on behalf of an issuer or security holder of the issuer, that reasonably could be expected to promote the purchase or sale of securities of the issuer, with certain limited exceptions.

In other words, promotional activity and investor relations activities are not just news releases, “newsletters”, and “road shows”, but also:

  • posting on social media, whether text, images, or video,
  • sharing messages by email, through apps, or on social platforms or servers,
  • creating content for websites, including dedicated landing pages or microsites, and
  • having anyone else help you with such communication, such as “influencers”.

Securities laws apply to promotional activity and investor relations activities, regardless of what you call the communication or the method you use.

For example, people often describe promotional activity and investor relations activities as: “marketing”, “advertising”, “publicity”, “raising awareness”, or “educating the market”. These “campaigns” can be “digital”, “social media”, “advertorials”, or for “[foreign] market awareness” or “business promotion”.

Importantly, you may be engaged in promotional activity and investor relations activities whether or not:

  • you are being paid or otherwise compensated,
  • the issuer or security holder is selling securities at the time, or
  • your main focus is not to get a person to buy, sell, or hold securities – it is enough that your communication has that as a side effect.

That means, if you are communicating about a company, you need to be careful to follow the law, or else there can be serious consequences.

Communications Must Not Be Misleading

Securities laws forbid promotional activity and investor relations activities that may mislead investors.

This includes sharing information about a company that:

  • Exaggerates its business or opportunities
  • Only tells the one side of the story (good or bad), or leaves out important details
  • Makes unrealistic promises or predictions
  • Does not disclose conflicts of interest, or
  • Includes information or uses language that is potentially confusing

Securities law also bans unfair practices in promotional activity, such as putting unreasonable pressure on a person, taking advantage of their vulnerability, or imposing abusive terms and conditions.

Exaggerations and Unbalanced Statements

You must not make a misrepresentation. Misrepresentations are untrue statements of a material fact, and also statements that are false or misleading because they leave out a material fact.

You must also not provide information that is false or misleading (including by omitting a fact), when a reasonable investor would consider that information important in determining whether to purchase, not purchase, trade, or not trade a security.

Examples of misrepresentations and misleading statements that are prohibited could include:

  • describing only the positives, without also stating material risks
  • disclosing that a company has raised significant funds, but not that it has already been spent almost all of the money
  • claiming the company has assets that it does not own
  • making a bold claim in the headline which is then “watered down” elsewhere in the promotion
  • using disclaimers that restrict or contradict the main message, particularly if the disclaimers are at the end of the communication, buried in lines of dense fine print, or otherwise hides their true meaning
  • asserting that the BCSC has approved the merits of any security or the accuracy of an issuer’s disclosure

For example, in Michaels (Re), 2014 BCSECCOM 327, an advisor made misrepresentations when he failed tell his clients about the significant risks in investing in the securities he sold them.

Likewise, in Re New Point Exploration, 2023 BCSECCOM 170, a company was found to have made misrepresentations when it did not tell investors that the money it had raised would not be used to develop certain mineral properties as it had suggested previously.

Future Events (“Forward-Looking Information”)

When writing about possible future events for a public company, such as plans, forecasts, projections, or predictions, you must:

  • have a reasonable basis for your statements, and
  • include specific cautionary language.

You may also have to disclose potential risks, your assumptions, and the company’s policy giving updates.

That is because special rules apply to “forward-looking information” for a public company, especially “future-oriented financial information”, under National Instrument 51-102 Continuous Disclosure Obligations.

Communication that represents the future value or price of a security are also illegal.

For example, in Sniper Sports Ltd. (Re), 2005 BCSECCOM 560, the president and director of a company was found to have breached the law when he told some investors that the public shares of the issuer would open at a price of $2.80 to $3.20 US per share.

Potential Conflicts of Interests

If you are communicating about a company that you own securities in, you should disclose that you have a potential conflict of interest.

If you promote a company while secretly trading in securities of the company, you may be committing securities fraud. For example, in Budai (Re), 2007 BCSECCOM 610, a publisher bought shares in companies, profiled the companies in his newsletter and on the radio, and then sold his shares in the rising market without disclosing that selling and intention to sell. As a consequence, he was permanently banned from being a director or officer of a public company or engaging in investor relations activities, among other things.

By letting investors know about your potential conflict of interest, they can decide for themselves how much to rely on the story you are telling.

For the same reason, if you are sharing information on behalf of a company (or anyone holding its securities) you must disclose that fact and do so “clearly and conspicuously”.

To be “clear and conspicuous” as required by law, records disseminated in investor relations activities must include a statement that they are on behalf of the named company (or security holder) that is:

  • in plain language,
  • in a prominent spot and in prominent font, and
  • that is designed to catch the attention of the reader or viewer.

In Re Stock Social Inc, 2023 BCSECCOM 52, a company published advertorials (articles designed to look and read like objective journalistic content) and made social media posts for issuers that did not “clearly and conspicuously” disclose that they were on behalf of the issuers. That company, and its president, CEO, and director personally, was found liable for those investor relations activities.

The BCSC has explained how you can compliantly disclose your relationship with an issuer in BC Notice 51-703 “Clear and Conspicuous” Disclosure of Investor Relations Activities under Section 52(2) of the Securities Act, RSBC 1996, c. 418.

If you have not been making “clear and conspicuous” disclosure as required, you may benefit from self-reporting to the BCSC, as described in BC Notice 15-701 Credit for Cooperation in Enforcement Matters

Financial and Technical / Scientific Information

Special rules apply to certain kinds of information that could potentially mislead non-experts.

Financial information, for example, will generally be disclosed by reporting issuers following Generally Accepted Accounting Principles (GAAP). GAAP are a common set of accounting standards, which make companies describe their financial performance and position in a consistent way. Under GAAP, companies should report their financial information similarly, so that the information is understandable and easily comparable.

As a result, financial information that is disclosed without following GAAP is potentially misleading, so public companies are restricted in how they can use non-GAAP financial information. They must follow National Instrument 52-112 Non-GAAP and Other Financial Measures Disclosure, including in a promotion.

Scientific or technical information about a mineral project can also be confusing to someone who is not a geoscientist or engineer. To protect investors, mining companies must meet high standards for disclosure (similar rules apply to oil and gas properties).

One important such safeguard is a requirement that scientific or technical information be reviewed and approved by a named “qualified person” who is an expert in the subject matter. This rule, like the others in National Instrument 43-101 Standards of Disclosure for Mineral Projects, apply to all written communication for an issuer, even on social media.

Communications about Certain Companies

You should take extra care when communicating about certain companies:

Companies that are planning to have an initial public offering (IPO) are limited in what they can disclose and to whom, and

Companies that are quoted in U.S. over-the-counter markets may have to make significant filings in British Columbia, if promotional activities have been carried on in or from this province (see Requirements for Issuers Quoted in U.S. Over-the-Counter Markets).

Checklist

Click here for a checklist of what to consider before communicating to investors or potential investors.

Resources