Securities Law

LPS 3-39 - Guidelines for Advertising Issues of Securities and for Promotional Activities During the Course of a Distribution [Rescinded]

Published Date: 1987-01-16
Effective Date: 1987-02-01
Rescinded Date: 2001-06-30

1.0        IMPLEMENTATION 

1.1        This Local Policy Statement has been revised solely to conform with the Securities Act S.B.C. 1985 c.83 and the Regulations thereto.  Other than consequential amendments, there have been no changes of a substantive nature to this policy.  It becomes effective upon proclamation of the Act on February 1, 1987.

2.0        ADVERTISERS AFFECTED BY THIS POLICY STATEMENT AND PROCEDURES TO BE FOLLOWED BY SUCH ADVERTISERS

2.1        Registrants for trading in securities who are not members of either the Vancouver Stock Exchange or the Investment Dealers Association, (e.g. security issuer) and others authorized to distribute a security are required to file with the Superintendent a copy of all advertising material, literature, promotional information and lead getting material of any kind to be used in the course of a distribution.

2.2        Copy in the nature of institutional advertising by the dealer (i.e. copy advertising the registrant's services) and copy relating to an offer of a security need not be submitted to the Superintendent prior to publication, but must be filed at the Office of the Superintendent within five days of publication, and must be suitably red-lined and annotated (see Section 3.2 below).  A tear sheet from a newspaper display, suitably identified, red-lined and annotated, will suffice for filing purposes.

2.3        All copy submitted under Section 2.2 above will be filed for reference in the event of inquiry, complaint, etc. and will be deemed a filing under Section 138 of the Act.  All such copy should adhere to the relevant guidelines set out in Sections 3 to 5 below.  A Section 2.2 filing which fails to adhere to these guidelines may prompt the Superintendent to take appropriate disciplinary measures and/or to require to be withdrawn from publication any copy which he deems to be misleading.

3.0        GUIDELINES OF GENERAL APPLICATION

3.1        Public confidence is a significant factor in the complex process of raising capital.  One of the goals of the Act is to promote such confidence in the British Columbia capital market and thus to insure continued infusion of risk capital to finance new economic activity.  In furtherance of this goal, the Act prescribes full disclosure of all the pertinent facts and figures which are needed by a prospective investor making a judgement about an issuer's securities.  Such full disclosure ideally should be provided by a limited amount of advertising of security offerings, the Commission is aware that full disclosure can seldom be encompassed in an advertisement, and as a result expects advertising copy to be worded so as to encourage the interested reader to consult the relevant offering circulars for the pertinent facts.  Copy should be free of quotations, opinions and data which may lead the reader to make false inferences.  Above all, partial disclosure of a series of facts and figures should be avoided when full disclosure of such facts and figures is required for a proper comprehension of the offering.

3.2        Promotional assertions must be substantiated by reference to disclosure of facts in the related institutional brochure or securities offering circular.  All such assertions appearing in advertising copy filed with the Superintendent must be red-lined and cross-referenced to the relevant disclosure in the brochure or circular previously filed.

3.3        The use of words such as "preferred", "guaranteed", "liquid", and "indemnity" should be avoided.  When modifiers are employed, their context must be clear, e.g. when "preferred" is used, the nature of the preference (dividends, creditor's claim) must be disclosed; when "guaranteed" is used, what it is that is guaranteed, the guarantor and the underlying security for the guarantee must be disclosed; "liquid" means "readily convertible into cash" and should be used only when such convertibility can be achieved at no loss to the investor.  The onus is on the registrant or other distributor to avoid using equivocal words and phrases and to insure that copy is so worded that a reader cannot reasonably draw a false inference.

3.4        A reference to a benefit, or a comparison of outlay and benefits or returns from outlay must be free of equivocation, e.g. if a reference is made to a benefit which has specific conditions or contingencies riding on it, a reference must also be made to such conditional aspects.  If matched columns of figures representing outlay and recovery or outlay and tax benefits resulting from such outlay are disclosed, the reader is entitled to infer that no conditions attach to such figures unless such conditions are clearly disclosed.  Where full disclosure on such points cannot be achieved in the advertising copy, partial disclosure should be avoided.

3.5        Reference to historical financial data must be based on the results for at least three consecutive years.  When the issuer has had less than three years experience, any disclosure of financial data must be accompanied by a caveat to this effect.

3.6        The foregoing guidelines should be followed, where applicable, in promotional presentations made through the medium of television or radio.

4.0        GUIDELINES FOR REGISTRANTS MAKING A DISTRIBUTION BY A PROSPECTUS

An advertisement must contain a disclaimer stating that it must not be construed as an offering and that the offering is made only by prospectus.  In addition, the name and address of at least one registrant from whom more information and a copy of the prospectus may be obtained should be disclosed.

5.0        PROMOTIONAL ACTIVITIES DUR]NG THE COURSE OF A DISTRIBUTION TO THE PUBLIC

5.1        A significant lapse of time may occur between a decision of management to seek financing by way of a prospectus offering, the preparation and filing of a preliminary prospectus, with the receipting of the final prospectus, engaging in the distribution of the securities and concluding such distribution.  Any promotional activity occurring over this time should be such as to support full, true and plain disclosure provided in the prospectus.

5.2        The Act defines "trade" to include any act, advertisement, conduct or negotiation, directly or indirectly in furtherance of a trade.

5.3        Where over the time period described in Section 5.1, an issuer received coverage by way of an article in a newspaper or magazine, or by way of a broadcast to telecast, the onus is on the promoters, directors, registrants and all others having some interest in an issuer not to participate in any promotional activity which may result in the dissemination of representations about the issuer which are not supported by the prospectus disclosure.

5.4        Where in the opinion of the Superintendent material facts about an issuer as described in paragraph 5.3 have been disseminated, he may require that the prospectus contain express disclosure of such misrepresentation as a condition of receipting the prospectus or permitting a distribution to continue.

 

DATED at Vancouver, B.C., this _______ day of____________ ,19 __.

 

Jill Bodkin
Chairman
B.C. Securities Commission