The B.C. Securities Commission has ruled that Stock Social Inc., an investor relations company that relied on social media "influencers," broke the rules with materials it distributed touting five listings. The materials, which were "singularly positive," failed to properly disclose that they were part of a paid promotion. Stock Social's largest customer, Canadian Securities Exchange listing MGX Minerals Inc., paid $408,300 along with a $40,000 (U.S.) fee for the touting, the BCSC says.
The findings are contained in a decision that the BCSC released on Tuesday, Jan. 31. They apply to Stock Social as well its president, West Vancouver resident Kyle Alexander Johnston. There are no fines or other sanctions, as the BCSC will hold a separate hearing to determine the appropriate penalties.
The case, as set out by the BCSC, centres around investor relations work that Stock Social did for five companies from August, 2016, to March, 2018. It prepared advertising that went out through several websites, generally written in the style of a news article, the BCSC said. The problem, at least according to the BCSC, was that the material failed to clearly state that it was advertising. (Such disclosure is mandatory for promotional material in most jurisdictions.)
The violations, as set out in the decision, arose in part from advertising that Stock Social did on behalf of MGX in 2017. The ads went out through newswires and websites, largely touting the company. The material was also distributed through 17 influencers, who posted on Twitter, Facebook and LinkedIn. Some of the ads did have disclaimers stating that they should not be accepted as investment advice, but nothing clearly indicated that they were issued on behalf of MGX. What disclosure did exist was hardly conspicuous, coming at the end of long passages or in small print, the BCSC said.
Tuesday's decision is relatively brief, as the matter was uncontested. Stock Social and Mr. Johnston admitted to many of the BCSC's allegations in an agreed statement of facts. They have indicated that they will contest the matter of penalties, however.
Also included in Tuesday's decision is a finding of liability against one of the companies that Stock Social promoted, ImagineAR Inc. The BCSC had accused the company of failing to ensure its promotional material complied with the rules. The BCSC previously imposed fines totalling $125,000 against several other clients, with those clients settling the matter without a hearing. Those accepting the fines included MGX Minerals and its president, Jared Lazerson. Also accepting fines were Phivida Holdings Inc. president John-David Belfontaine; ImagineAR adviser Chad McMillan; Bearing Lithium Corp. and its president, Jeremy Poirier; and Hello Pal International Inc. and an officer of the company, Ryan Johnson.
In the markets, the five companies are mostly trading for pennies. ImagineAR closed at three cents Tuesday, down half a cent; Phivida Holdings no longer trades; MGX Minerals last traded on March 3, 2022, at five cents; Bearing Lithium was last at 28.5 cents; and Hello Pal was last at nine cents.