Investor Relations Activities

Investor Relations Activities – Reminders for TSXV and CSE Issuers

The BC Securities Commission (“BCSC”) recently issued BC Notice 51-703, which reminds issuers of the requirement to “clearly and conspicuously” disclose their relationship with persons engaging in investor relations activities on their behalf. Using plain language, in a prominent spot/font and in a way that is designed to catch the attention of the reader, the promotional materials must disclose this relationship and the fact that the materials were issued on behalf of the issuer. The BCSC also reminds issuers that they must comply with any applicable TSX Venture Exchange (“TSXV”) or Canadian Securities Exchange (“CSE”) requirements – this post summarizes some of the key TSXV and CSE requirements to keep in mind.

Permitted Compensation

The TSXV and CSE each have limitations on the types of compensation payable for investor relations, promotional and market-making activities (generally referred to in this post as “investor relations activities”). Both exchanges require compensation to be reasonable and in proportion to a company’s financial resources and level of operations/business activity.  Listed venture issuers should assess this on a case-by-case basis.

Another, more objective, requirement is the restriction on the amount of security-based compensation payable for these activities. TSXV and CSE policies impose a 2% aggregate limit on stock options granted to persons providing investor relations activities to an issuer. Exactly how the 2% limit is calculated on each exchange is nuanced and should be considered carefully when granting options to persons providing investor relations activities.

The issuance of any other securities to persons providing investor relations activities to listed venture issuers is very restricted. With respect to this point and other potential pitfalls regarding investor relations activities, TSXV listed issuers should keep in mind the recent TSXV bulletin dated April 10, 2024 - Re: Investor Relations, Promotional and Market-Making Activities (the “Bulletin”). Among other things, the Bulletin reminds issuers and stakeholders that the TSXV’s restriction on security-based compensation (other than stock options) issuable to persons providing investor relations activities applies to both direct and indirect compensation, which serves as a reminder that cheque swaps in connection with private placements are unacceptable. Furthermore, the TSXV may in some cases require certifications/undertakings to ensure that is complied with.

Compensation paid by TSXV or CSE listed issuers to persons providing investor relations activities may not be based on an issuer’s shares reaching a certain market price or trading volume.

Filing Requirements, Disclosure and Responsibilities

Regardless of the compensation agreed to between listed venture issuers and investor relations service providers, the TSXV and CSE have certain mandatory filing and disclosure obligations, in addition to what is required under applicable securities laws. Depending on the applicable exchange, those obligations include prescribed news release content, written agreements with prescribed terms, summary filing forms and/or personal information forms/declarations. Certain other disclosure obligations are triggered in the new listing (ie. IPO, RTO, QT, etc.) context as well.

In the Bulletin, the TSXV also reminds issuers that they are ultimately responsible for the activities of their promotional, market-making and investor relations service providers and are expected to monitor their activities to ensure compliance. This requirement extends to the activities of, and the oversight of, consultants, contractors and sub-contractors (among others).

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DuMoulin Black LLP is a leading corporate finance and securities law firm based in Vancouver with a long track record of working with companies listed on Canadian stock exchanges.

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