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Securities Law

NIN 89/35 - Disclosure of Promotional of Investor Relations Arrangements [Rescinded - NIN]

Published Date: 1989-11-24
Effective Date: 1989-11-24
The attached draft notice is being published for industry and public comment. Although it is not the Securities Commission's normal procedure to publish exposure drafts of notices (as opposed to policy statements), we are of the view that given the subject matter of the notice, a comment period would be beneficial.

Comments on the proposed notice should be submitted in writing to the Securities Commission, attention of Adrienne Wanstall, Deputy Superintendent, Policy and Legislation on or before January 31, 1990.

DATED at Vancouver, British Columbia, this 24th day of November, 1989.
Neil de Gelder
Superintendent of Brokers




One of the most pertinent items of information about an exchange issuer is the arrangements that it or its principals may have made to ensure continued interest in the issuer's securities. Unfortunately, this information is often not made available to investors, either because it is not specifically called for in the prescribed forms for a prospectus or statement of material facts, or because the information is for some reason not considered by management of an exchange issuer to be a material fact or material change triggering disclosure obligations.

The Securities Act requires disclosure of any arrangements or activities designed to enhance after - market support of, or liquidity in, an issuer's securities if the result of such arrangements or activities could reasonably be expected to significantly affect the market price or value of the issuer's securities. If the arrangements are in place at the time of a public offering, they must be disclosed as a material fact in the issuer's prospectus or statement of material facts. If the arrangements are made subsequent to a public offering, or if the arrangements disclosed in a prospectus or statement of material facts change, this would generally be a material change in which case the issuer must file a press release and material change report in accordance with section 67 of the Securities Act.

Given the variety of market support arrangements which may be entered into, it would be unnecessarily restrictive for the Securities Commission to set out a checklist for the type and breadth of disclosure required. Notwithstanding this, some general principles can be stated, particularly in the context of junior issuers listed on the Vancouver Stock Exchange for which these types of arrangements are often significant.

1. Disclosure should be made of any arrangements -written, oral or implicit - that the issuer has with any individual or company to act as a promoter, as an investor relations representative or consultant, or as a market maker for the issuer or its securities. The term 'promoter' is used here in its colloquial sense, and is not restricted to the definition in the Securities Act. The principle set out in this paragraph is not intended to extend to brokers or investment dealers in the province that, at their discretion and with their own funds, make a market in an issuer's securities from time to time, provided that there is no arrangement with the issuer, as contemplated by this notice, pursuant to which such activities are required to be performed.

2. Disclosure should be made of arrangements made by

(i) an issuer with any third party, including any director, officer, or employee or other insider of the issuer,
(ii) a director, promoter or other insider of the issuer, on behalf of or with the concurrence of the issuer, with any third party, or
(iii) a director, promoter or other insider of the issuer on his or its own initiative where the issuer, after having made reasonable enquiries, knows that such arrangements have been made.

3. Disclosure should include a brief description of the background, business and place of business of the person providing the services. It should indicate whether that person has any interest, directly or indirectly, in the issuer or its securities, or whether the person has any right to acquire such an interest, either as full or partial compensation for his services or otherwise.

4. Full particulars of the arrangements for all remuneration, direct or indirect, should be made, including whether any payments will be made in advance of services being provided. If the issuer does not have sufficient funds to pay for the services, it should indicate the anticipated source of funds to meet its obligations in this regard.

5. The nature of the services to be provided should be summarized, including the means by which and the period during which the services will be provided, whether the person providing the services will commit his or its funds to the purchase of the issuer's securities, or whether the person will act as agent for any other persons who will do so.

It is the issuer's responsibility to ensure that any arrangements are consistent in scope with the operations and financial resources of the issuer, and comply with applicable companies and securities legislation and applicable stock exchange policies. It is also the issuer's responsibility to ensure that the arrangements do not create or result in a misleading appearance of trading activity in, or artificial price for, the issuer's securities, for example by requiring or providing incentives for the maintenance of a price or volume for the issuer's securities at a certain level by a certain date, or for a specified period of time. Finally, the issuer should be satisfied that persons with whom arrangements are made are qualified to provide their services. This could include registration under any securities legislation that may be applicable.

DATED at Vancouver, British Columbia, this * day of * , 1990.

Superintendent of Brokers