On November 29, the Canadian Securities Administrators (CSA) published CSA Staff Notice 51-356 Problematic Promotional Activities by Issuers (Notice). Although issuers are the primary audience for the Notice, we think that dealers will find the Notice instructive as well, since they could face situations where an issuer whose securities they are distributing engages in or is considering promotional activities that regulators view as potentially misleading. The Notice describes activities that have raised concerns for regulators including:
- Compensating third parties who use social media and general investing blogs to promote issuers but do not disclose their agency, compensation or other financial interest;
- Announcing an issuer name and/or business change to reference an emerging industry or technology such as block chain, cannabis, battery minerals or cryptocurrency without a supporting business plan or comprehensive risk disclosure; and/or
- Announcing a positive event such as a large acquisition and then changing or cancelling the transaction with no announcement.
Helpfully, the Notice also includes a high-level summary of the requirements and guidance relevant to promotional disclosures and other activities, as well as a description of the actions that regulators could require an issuer to take if their behavior is found to be problematic.