The British Columbia Securities Commission (BCSC) has issued new guidance on its prohibitions against misleading disclosure, which have been expanded and may be tougher than the requirements in place in other provinces.
In a staff notice Thursday, the BCSC set out some guidance on the provisions in B.C. securities law that are designed to guard against misrepresentations and false or misleading statements that are made as part of promotional activity.
“These prohibitions may be broader than in some other Canadian provinces and territories,” the regulator said in its notice, adding that these standards will be applied in its disclosure reviews and that it will take enforcement action for violations of these provisions.
For instance, in the new guidance, the regulator highlights the fact that the prohibition against misrepresentation doesn’t have to be connected to investor relations activity or to any trading intention — which is a broader approach than the previous restriction.
“For there to be a contravention, the statement must be about a material fact, which is defined … as a fact that would reasonably be expected to have a significant effect on the market price or value of a security,” the BCSC said, but the misrepresentation doesn’t have to be made as part of investor relations activity, or with the intention of causing a trade in a security to be deemed a violation.
Similarly, the prohibition against false or misleading statements that are made during promotional activity has also been broadened, as misleading statements no longer have to include a material fact to be considered a violation.
Instead, information can be considered misleading if “a reasonable investor would consider that statement or omission important when deciding to buy or trade a security,” the regulator said.
Therefore, in an enforcement proceeding, regulators don’t have to prove that a misleading statement would be expected to have a significant effect on a security’s price.
Additionally, the definition of “promotional activity” includes online marketing — such as promotions on social media, in chatrooms, emails and videos — not just disclosure in regulatory filings.