The British Columbia Securities Commission (BCSC) has issued a notice emphasizing its expectations for investor relations disclosure.
The notice aligns with the recent Commission decision in Re Stock Social Inc., which provides guidance on promoting transparency and clarity in marketing and promotional material. The decision interprets a provision of the Securities Act requiring that investor relations communications "clearly and conspicuously" state if they are distributed on behalf of an issuer or security holder.
In the Stock Social Inc. case, the BCSC panel emphasized that investor relations materials designed to promote the purchase or sale of securities must be disclosed if disseminated on behalf of a company or security holder. This also applies to marketing communications through influencers' social media posts. According to the decision, the disclosure must be in plain language and explicitly state that the content was "disseminated on behalf of" or is a "paid advertisement on behalf of" the company.
The panel further clarified that such disclosures should be prominently placed at the beginning or near the substantive portion of the communication, using an attention-grabbing font and placement. They should not be hidden in standard terms and conditions that are typically ignored by readers. Additionally, linking to a separate website for disclosures requires readers to take extra steps and is generally insufficient. The necessary disclosures should instead be integrated directly into the communication.
The BCSC panel found that Stock Social Inc., a marketing company, and its CEO had repeatedly violated the Securities Act by failing to clearly disclose that they were promoting content on behalf of five companies in mining, technology, and cannabidiol (CBD) products. The advertorials were written to resemble news articles but failed to mention risks or negative factors that would be expected in unbiased reporting. Furthermore, any disclaimers indicating that fees were paid did not clarify on whose behalf, and they were not displayed prominently.
"The Commission panel laid out specific expectations for the level of clarity and candour 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 candour 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."