CSA Provides Advertising, Marketing and Social Media Guidance for Crypto-Trading Platforms
On September 23, 2021, the Canadian Securities Administrators (CSA) and the Investment Industry Regulatory Organization of Canada (IIROC) provided detailed guidance directed at the marketing practices of Crypto-Trading Platforms (CTPs). Joint CSA/IIROC Staff Notice 21-330 Guidance for Crypto-Trading Platforms: Requirements relating to Advertising, Marketing and Social Media Use (“Staff Notice 21-330”) provides an overview of the principal requirements under securities legislation and IIROC rules pertaining to the advertising and marketing strategies of registered and prospective CTPs.
Scope of Staff Notice 21-330
The Staff Notice 21-330 is intended to provide guidance to:
- CTPs that are registered as a dealer under securities legislation (“registered CTPs”);
- CTPs that have or will be applying for registration as a dealer but are not yet registered (“prospective CTPs”); and
- other registrants that may be considering establishing a CTP as a new business line.
The Staff Notice addresses:
- statements in advertising or marketing that could be considered false or misleading;
- the use of gambling-style contests, promotions or schemes, such as the offering of bonuses or rewards based on the level of trading;
- compliance and supervisory challenges when using social media to promote CTPs; and
- complying with securities legislation generally.
False or Misleading Advertising
Securities legislation and IIROC rules contain provisions prohibiting false or misleading statements in advertising or marketing materials. These prohibitions apply to the making of statements:
- that suggest a CTP is registered under securities legislation where this is not the case;
- that suggest a securities regulatory authority or regulator has approved or endorsed the CTP, any products offered on the CTP or any disclosure or other representation made by the CTP; or
about any matter that a reasonable investor would consider relevant or important in deciding whether to enter into or maintain a trading or advising relationship with the CTP if the statement is untrue or omits information necessary to prevent the statement from being false or misleading.
“Gambling Style” Promotions and Schemes
Staff Notice 21-330 cautions registered CTPs that as gatekeepers of the capital markets, they should not engage in conduct that brings the market into disrepute. As such, advertising or marketing designed to encourage excessively risky trading may violate the registrant’s obligation to treat clients fairly, honestly and in good faith.
Advertising that could be considered to inappropriately encourage investors to engage in excessively risky trading include contests, promotions, bonuses and time limits, as they incentivize investors to trade and act quickly for fear of missing out on an investment opportunity or reward.
Social Media – Policies and Procedures
CTPs are expected to consider compliance and supervision when using social media websites and platforms. CTPs are required to adopt policies and procedures governing the use of social media for marketing purposes. These policies should provide for:
- the review, supervision, retention and retrieval of advertising and marketing materials, including marketing done on social media platforms;
- the designation of an appropriate individual to be responsible for the supervision or approval of marketing communications; and
- a system to monitor compliance with policies and procedures, including record retention and retrieval capability.
Implications
Staff Notice 21-330 clarifies which CTP marketing activities are acceptable under securities legislation and IIROC rules, with the expectation that registered and prospective CTPs will conform their practices to meet these requirements. The policies in the Staff Notice are not new, but rather consolidate a number of provisions and accordingly, no transitional period has been offered. Immediate compliance is encouraged as securities regulators are becoming increasingly focused on CTP advertising in the Canadian market.
Expertise
Authors
Insights
-
Technology
DMZ Demo Day to Award $300,000 in Prizes to Startups
This upcoming summer, on June 26, 2023, the DMZ will host its inaugural Demo Day at the Toronto Metropolitan University. The DMZ is a world-leading incubator for tech startups around the world. The… -
Technology
Going Once, Going Twice, Sold! Peggy Paves the Way for the Artist Royalty Movement
Toronto-based start-up Peggy brings the art world to your fingertips. With Peggy, co-founders Craig Follett and Adam Meghji provide a digital marketplace for buying and selling contemporary art. Peggy… -
Technology
Cutting Down on Medical Waste with AI: AssistIQ Raises $2.5 Million
AssistIQ is a medical technology startup that has developed a new artificial intelligence platform aimed at reducing medical waste created by hospitals. In late 2022, AssistIQ raised $2.5 million CAD… -
Technology
Raven.ai Raises US$12 million in its Effort to Combat Supply Chain Issues
Raven.ai is an Ottawa-based startup that leverages its overall equipment effectiveness (“OEE”) improvement software to help companies improve their supply chain efficiency. The OEE software’s output… -
Technology
U.S. District Court Finds NBA Top Shot Moments may be Subject to U.S. Securities Laws
On May 12, 2021, a class action law suit was filed against Dapper Labs, Inc. in the U.S. District Court for the Southern District of New York (the “Court”) alleging that Dapper Labs violated U.S… -
Technology
Vancouver-Based Fintech Start-Up Secures $1 Million in Pre-Seed Round to Simplify Loans
Levr.ai is a Vancouver-based B2B fintech start-up aiming to transform the way businesses access and manage loans. Levr.ai’s goal is to create a platform where both business owners and financial…
Featured Work
-
Restructuring
Sherritt International Corporation Completes $90 Million Notes Purchase Transaction
Goodmans LLP represented Sherritt International Corporation in its $90 Million Notes Purchase Transaction Pursuant to Oversubscribed Offers… -
Technology
Ten Thousand Coffees (10KC) Announces $56M investment from Five Elms Capital
Goodmans LLP acted for Ten Thousand Coffees (10KC) in connection with its $56 million investment from Five Elms Capital… -
Technology
VendorPM Inc. Raises $20M Series A Financing
Goodmans LLP acted for VendorPM in relation to its $20 million Series A venture financing round led by Prudence with significant contributions from Bessemer Venture Partners, Navitas Capital and Alate… -
Technology
Vetster Inc. Raises $30M in Series B Financing
Goodmans LLP acted for Vetster in relation to its $37.8 million Series B venture financing round and strategic partnership with PetMed Express… -
Technology
Purefacts Financial Solutions Inc. Raises $37M
Goodmans LLP acted for PureFacts Financial Solutions Inc. in connection with its $37 million strategic financing from Canadian Business Growth Fund… -
Mergers and Acquisitions
Dye & Durham Ltd. Acquisition of TELUS' Financial Solutions Business
Goodmans LLP acted for Dye & Durham Ltd. in connection with their acquisition of TELUS' Financial Solutions Business and certain assets from TELUS Corporation ("TELUS") for $500 million…
News & Events
-
- Technology
Peter Ruby at the 2023 World Technology Law Conference
Join Peter Ruby on May 24th - 26th at the 2023 World Technology Law Conference. The 2023 World Technology Law Conference covers topics such as: Antitrust / Anticompetition in Technology… -
Banking and Financial Services
The Canadian Legal Lexpert Directory 2023 Continues to Recognize Goodmans
We are proud to announce we have once again been recognized in The Canadian Legal Lexpert Directory 2023.85 Goodmans lawyers have been recognized as top-tier in their fields and leaders across… -
Banking and Financial Services
Chambers and Partners Continues to Honour Goodmans with Global Recognition
We are proud to announce Goodmans LLP has once again received top tier recognition from Chambers and Partners in the Chambers Global 2023 Guide released today. Recognition from Chambers and…