B.C. social media company first to be fined for illegal stock promotions

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A B.C. Securities Commission hearing panel was more lenient against a social media company than the commission's executive director had hoped for in a precedent-setting case of social media-era stock promoting.

A B.C. Securities Commission hearing panel has fined an online stock promotion company $50,000 for illegally promoting five small public companies that paid the promoter more than half a million dollars.

The commission’s executive director Peter Brady brought the case to a hearing last September, after investigating Stock Social’s activities. Brady sought repayments of over $454,000, plus US$63,500, representing the receipts Stock Social issued to the companies. Brady also sought a $60,000 penalty against the company. With respect to Johnston, Brady sought a $25,000 penalty and a two-year ban on all promotional activity for registered public companies — obtaining only the former.

All parties agreed Johnston and Stock Social represented a low risk of re-offending, especially with Stock Social being dissolved. Johnston deposed that the company only retained about 20-30 per cent of the funds as the rest went to other service providers, although it’s unclear who and exactly how much of the funds were related to services that broke the rules.

The panel’s rulings never stated what, if any, harm was done to investors or to what extent the advertorials may have enriched the companies' stock price.

 

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