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The capital market watchdog’s plan to introduce rules for all social media platforms is noteworthy amid recent volatility in previously underwhelming stocks such as GameStop and AMC, which appears to have been driven in no small part by retail investors across North America responding to videos on YouTube and postings on the social media platform Reddit.
Brady said the B.C. securities regulator, no stranger to wild stock swings and promotional activity, is looking at a number of new enforcement tools following a wave of “problematic promotional activities” over the past few years, much of it involving cannabis and blockchain companies, and battery metals such as lithium and cobalt.
The pump and dump game has changed
Peter Brady, executive director, BCSC
In addition to the rules that would specifically target disclosure on social media, legislative amendments to the provincial securities act passed last March relieved the BCSC of the need to establish that a misrepresentation had an effect on share price, a change that lowers the burden of proof for the regulators and makes enforcement easier.
The BCSC only has to prove only that a statement or omission would be “important” to a “reasonable Investor” in determining whether to trade a security.
“If we don’t have to prove market impact, then we can be more effective in combatting misleading statements (including) on social media,” Brady said. “Maybe you would never be able to show that that lie is going to move the stock.”
He said there has not yet been a test case of the lower threshold, and it is too soon to say if any of the new powers sought by the watchdog could be used to intervene in current cases of trading volatility, which bled from stocks including GameStop, BlackBerry Ltd., and Bed Bath & Beyond into the silver market last week.
