Many of our readers likely have read or heard about the recent settlement between the Ontario Securities Commission (OSC), NextBlock Global Limited (NextBlock) and Alex Tapscott (Tapscott) regarding misleading statements in slide decks (Investor Decks) given to prospective investors in a private placement. The Investor Decks, which were the only materials describing the company’s business and affairs that the prospective investors received, asserted that various, prominent blockchain figures were NextBlock’s advisers. In fact, these individuals had not agreed to act as advisers or have their names included in the materials.

The settlement itself cost NextBlock $800,000 and Tapscott $300,000 in administrative penalties and contributions to the OSC’s investigation costs. These amounts were in addition to payouts already made to investors (representing a 140% return on their original investment).

This case acts as an important reminder that an OM is defined by its content and purpose, not its format or a label. That means a term sheet, investor summary, slide deck or cocktail napkin that purports to describe an issuer’s business and affairs and is prepared primarily for delivery to and review by a purchaser to assist with an investment decision about a prospectus-exempt distribution can be an OM, and therefore carry with it potential liability for misrepresentations. (There is a carve-out that may apply in some circumstances if the document is provided to an investor who is already familiar with the issuer.)