On October 3, 2022, the US Securities Exchange Commission (“SEC”) announced that it charged Kim Kardashian for failing to disclose her interest in the promotion of a crypto asset on social media, resulting in a settlement of USD 1.26 million. In its brief decision, the SEC explained that Ms. Kardashian failed to disclose the approximately US $250,000 she had received from EthereumMax for promoting the purchase of EMAX tokens to her 225 million Instagram followers.
A similar case in Canada could violate both the deceptive marketing provisions of the Competition Act and the registration requirements of the Securities Act. As set out in our previously published article, in order to comply with the Competition Act, as well as the Competition Bureau’s influencer marketing guidelines and Deceptive Marketing Practices Digest persons who promote a service, product, or any business interest on social media must disclose any “material connections” they have with companies whose products or services they are promoting, including payments, free products, discounts, or any other benefits. The disclosure should be:
- Inseparable from the content
- Appropriate in the circumstances of the post
While these remain untested waters, the deceptive marketing provisions would likely be applied to digital assets such as EMAX tokens.
Influencers promoting securities, including digital assets and cryptocurrencies, should also be mindful that these activities are regulated by provincial securities legislation. In Ontario, the Securities Act requires that persons advising with respect to buying or selling securities be registered with the Ontario Securities Commission. However, persons who provide investment advice that is not purported to be tailored to the needs of anyone receiving the advice are exempted from registration. To qualify for this exemption, the person providing the advice must concurrently disclose with the advice whether they hold a financial or other interest in the security.
Whatever you do on social media, make sure you keep up with all applicable laws and regulations.