Canada: Too Much Of A Good Thing? Canadian Securities Regulators Crack Down On Problematic Promotional Activities By Issuers

Last Updated: December 18 2018
Article by Brett Kagetsu and Denis Silva

A recent announcement by Canadian securities regulators1 demonstrates their growing concern with biased promotional materials, and highlights the risks to issuers when engaging with prospective investors.

The regulators state that they are seeing promotional activities by issuers that are either untrue or unbalanced to such a degree that they can mislead investors, with such activities being undertaken for the specific purpose of artificially promoting interest in the issuer's securities. This artificial inflation of interest then increases the issuer's share price and trading volume, which undermines the integrity of the capital markets and puts investors at risk of harm from making misinformed investment decisions.

Gowling WLG Focus

The securities regulators note that they will be undertaking a separate project to analyze the impact of activist short sellers on the Canadian capital markets. Combined with the announcement on a stricter approach to promotional activities, this signals a heightened sensitivity to investor protection in the Canadian capital markets.

In addition, while the examples of misleading promotional activities given in the recent announcement relate to activity the regulators are seeing in the venture issuer marketplace, they make it clear that their expectations regarding disclosure and promotional activities apply to all issuers. Issuers of all stripes should therefore take note of this announcement, and review their promotional practices to investors accordingly.

What do the Regulators Mean by Misleading?

The regulators provide a non-exhaustive list of examples of promotional activities that may potentially be misleading:

  • disseminating presentations, marketing materials, social media posts, or other information that describe early-stage plans with unwarranted certainty, or make unsupported assertions about growth of markets or demand for a product;
  • issuing numerous news releases that disclose no new material facts;
  • compensating third parties, who use social media and general investing blogs to promote issuers, but do not disclose their agency, compensation and/or 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;
  • announcing a positive event such as a large acquisition then subsequently changing or cancelling the transaction with no announcement; in addition, failing to disclose in the initial announcement the material conditions necessary to complete the transaction such as financing or due diligence, and failing to file corresponding material contracts or material change reports; and
  • disclosing details about mineral projects that:
    • suggest without direct evidence from sampling or exploration, that a property holds high potential for development including production (for example, including photos of assayed core beside new core, to imply mineralization prior to third party verification);
    • rely on projected peak versus long-term commodity prices; or
    • imply that a property holds a specific fair market value without a feasibility report.

What are the Risks to Issuers?

The regulators note that problematic promotional activities may result in enforcement action or other regulatory responses such as requiring issuers to:

  • issue a clarifying news release;
  • retract or remove overly promotional language from their disclosure record including their website and/or social media; and
  • re-file continuous disclosure documents.

The regulators will continue to monitor promotional activity and consider whether the scope and extent of problematic promotional activities require compliance or enforcement regulatory action to protect investors and the integrity of Canadian capital markets.

How can Issuers Mitigate Risk?

While attracting investors is critical to an issuer's success, the promotional activities must at a minimum comply with all relevant securities laws and follow guidance, including:

  • general prohibitions against:
    • false or misleading statements that would be expected to have a significant effect on the price or value of an issuer's securities;
    • acts, practices or conduct relating to securities that result in or contribute to a misleading appearance of trading activity or an artificial price for a security;
  • requirements that every investor relations record disseminated by or on behalf of an issuer or security holder must clearly and conspicuously disclose that the record is being issued by or on behalf of that issuer or security holder;
  • requirements that an issuer must not disclose forward-looking information ("FLI") unless the issuer has a reasonable basis for the information, and requirements that any such disclosure must:
    • identify FLI as such;
    • caution users that actual results may vary from the FLI and identify material risk factors that could cause actual results to differ materially from the FLI;
    • state the material factors or assumptions used to develop FLI;
  • requirements to update previously disclosed FLI when events and circumstances occur that are reasonably likely to cause actual results to differ materially;
  • guidance on general disclosure including:
    • the types of events or information that may be material;
    • avoiding exaggerated reports and potentially misleading promotional commentary;
    • establishing appropriate board and senior officer oversight over oral, written, and electronic disclosures;
    • issuers not participating in, hosting, or linking to chat rooms or bulletin boards;
    • reinforcing the need to also comply with exchange disclosure policies; and
  • guidance reminding issuers to have rigorous social media disclosure controls and reiterating the regulators' expectations that issuers ensure that all disclosures regardless of venue are balanced and not misleading, including by/through:
    • not making misleading statements and not excluding facts needed to avoid misleading readers;
    • announcing material changes in a factual and balanced way;
    • disclosing unfavorable news as promptly and completely as favorable news;
    • avoiding exaggerated reports or potentially misleading promotional commentary;
    • appropriately disclosing and using FLI;
    • not cherry-picking analyst reports; and
    • prominently disclosing when reports and articles are paid for by the issuer.


1 CSA Staff Notice 51-356 Problematic promotional activities by issuers.

*This article was prepared with assistance by Kean Silverthorn, Articling Student in our Vancouver office. 

Read the original article on

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Sign Up
Gain free access to lawyers expertise from more than 250 countries.
Email Address
Company Name
Confirm Password
Mondaq Newsalert
Select Topics
Select Regions
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions