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Issuers who advertise by way of television, radio, internet, social media and/or print will need to be particularly vigilant that such advertising is in compliance with applicable continuous disclosure requirements and is not misleading to investors.
The warning to issuers comes in the form of Staff Notice 51-336 – Issuers Using Mass Advertising (the “Staff Notice”) published on September 13, 2011 by the Canadian Securities Administrators in Alberta, Ontario, Québec, Nova Scotia, New Brunswick and the Northwest Territories (collectively, the “CSA”).
According to the Staff Notice, the CSA will be monitoring issuer’s advertisements for breaches of applicable securities laws and determining whether such advertisements are misleading to investors or generally contrary to the public interest. The CSA will also take appropriate regulatory action, including a review of such issuer’s continuous disclosure and/or the securities issued.
The Staff Notice was issued in light of the CSA’s observation of a number of junior issuers using short television spots in order to boost interest in their stock. The CSA noted that stock exchange listed issuers tend to prominently feature their ticker symbols in their advertisements, while unlisted issuers tend to provide contact information for further enquiries. The content of these advertisements is mainly focused on the issuer’s positive prospects and other positive aspects of the issuer’s business.
Accordingly, the CSA is concerned that advertisements for the purpose of promoting interest in an issuer’s securities may not comply with the issuers’ continuous disclosure requirements under securities laws. The CSA expressed a further concern that such advertisements may be misleading to investors. Moreover, the CSA is of the view that advertising to promote trading in an issuer’s securities does not reflect positively on issuers or on the Canadian capital markets.
The CSA reminds issuers of the restrictions on marketing and advertising during the distribution of securities, and on advertising conducted in furtherance of a distribution of securities. The Staff Notice reiterates the need for advertising to be in compliance with securities laws, especially in the resource industries. Mass advertising and social media in particular pose additional challenges for oil & gas and mining issuers who must each ensure that their disclosure is compliant with National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities and National Instrument 43-101 – Standards of Disclosure for Mineral Projects, respectively.
The Staff Notice is not concerned with advertising campaigns legitimately aimed at promoting the services of an issuer, or at raising public awareness about the issuer. While the CSA is primarily focused on advertisements aired on TV, the Staff Notice states that it is equally applicable to advertising conducted via social media, print, radio or internet.
Miller Thomson LLP has lawyers in offices across the country with the expertise and experience to assist issuers in ensuring their marketing activities – whether they are in print, on television or conducted via social media – are in compliance with all applicable securities laws.