New B.C. Securities Commission rules would target social-media stock promotions

Newsletters, blogs, and emails are the main focus of the proposed changes

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      New rules proposed by the B.C. Securities Commission (BCSC) would result in more transparency in company promotions aimed at investors in B.C.-related companies.

      BCSC executive director Peter Brady said in a May 26 release that potential investors should know if encouraging statements made in emails, blogs, or newsletters are designed to drive up share price: “People should know if someone promoting a stock has a financial or other interest, because that would help them decide how much weight to give the promotion and make better informed investment decisions."

      The BCSC is a Crown corporation that regulates capital markets in B.C. and administers the provincial Securities Act.

      The new regulations—which are being published for a 60-day comment period—would also apply to oral statements, videos, and all social-media posts, as well as any other means of communication.

      The release said details that would have to be disclosed in such future communications include: 

      • The name of the issuer on whose behalf the promotion is being conducted
      • Compensation being paid for the promotion
      • Whether the person conducting the promotion owns securities or derivatives related to the issuer
      • Where the promotion is taking place
      • Any other facts that would interfere with the objectivity of the person doing the promotion

      The BCSC said in the release that the proposed rules are "the first of their kind in Canada" and are made possible by Securities Act amendments that give it more power to regulate promotions by issuers, shareholders, and third parties.

      Also noted in the bulletin was the fact that new requirements will also be made of venture issuers: 

      • A venture issuer that outsources promotions would have to issue a news release specifying who it retained, the platforms on which the promotion will appear, and the compensation paid for the promotion. If a significant change occurs to any of this information, the issuer would have to issue an updated news release.
      • A venture issuer with promotional activity exceeding 10 per cent of its total operating expenses in a year (or interim period) would have to disclose those expenditures in its interim and annual reports.

      “Some companies have a legitimate need to engage in promotional activities, and they should have no trouble complying with the proposed rules,” BCSC execitive director Brady said. “But abusive stock promotions are a scourge that go hand in hand with abusive trading, and the new rules would give us one more tool to tackle them.”

      The commission said that it would accept comments on the proposed requirements until July 26, 2021.