Wednesday, 11 June 2008

Bloggers Contravening Securities Laws?

Many financial bloggers, me included, like to write about specific companies, mutual funds, ETFs or other investments that we either like or dislike. Are we thereby in danger of running afoul of securities laws that require people who give investment advice to be registered with a government regulator charged with protecting the public from the baddies of the world?

In Ontario, for example, the Ontario Securities Commission defines a Securities Adviser as,
"Persons or companies that hold themselves out as engaging in the business of advising others either through direct advice or through publications or writings, as to the investing in or the buying or selling of specific securities, not purporting to be tailored to the needs of specific clients."
and an Investment Counsel as,
"Persons or companies that engage in or hold themselves out as engaging in the business of advising others as to the investing in or the buying and selling of specific securities..."
Both types have to be registered and obtaining registration is only possible with a bunch of complicated and stringent conditions, which I doubt most bloggers would be able to fulfill, let alone be hardy enough to withstand the psychological torture of trying to do so.

There are also certain people exempt from the requirement to register, most notably journalists under section 34 (d) of the Ontario Securities Act:
"a publisher of or any writer for any newspaper, news magazine or business or financial publication of general and regular paid circulation distributed only to subscribers thereto for value or to purchasers thereof, who gives advice as an adviser only through such publication and has no interest either directly or indirectly in any of the securities upon which the advice is given and receives no commission or other consideration for giving the advice, where the performance of the service as an adviser is solely incidental to their principal business or occupation,..."
Since most bloggers don't charge a subscription fee, it doesn't look like that exemption would be sufficient. If the blogger happens to be a lawyer, accountant, engineer or teacher then that might work since they also get exemption under section 34, but even then if it not done in the course of that occupation, maybe it wouldn't.

I wonder if the word "business" in the text above regarding Securities Advisers and Investment Counsel would provide the out for bloggers. Do Google or other ads on a blog make it a business? I sure don't get much from mine! I bet the tax people wouldn't be very impressed by me trying to pretend this blog is a business and trying to deduct my computer and Internet costs.

Now, one can take the chance that the "OSC is too busy frying other fish or has not clued in to bloggers and won't do anything". But occasionally they wake up and go after someone, as they did a few years ago when Brian Costello received a $300,000 fine from the OSC.

To be cautious, maybe it would help for bloggers to plaster "this is not investment advice, consult an adviser" notices on their blog site..... Oops, on the other hand, cancel that last statement, the Law Society might come after me for dispensing legal advice.

Caveat blogger and by the way, caveat investor now and forever.


Anonymous said...

Alberta has similar laws. I looked into seeing what it took to get the minimum accredation once - to become an advisor you need to work for one for at least 5 years, have a certain level of education and pass certain exams. Sounds real feasible :-)

A disclaimer (preferably lawyer reviewed) seems to be a good safe bet, but I'm sure this will fly under the radar until someone claims to be have been 'taken' by advice they received on a blog. At that point, all bets are off and I estimate the personal finance blogosphere will face serious alterations once that occurs (notice I'm not saying 'if').

Until then, carry on!

CanadianInvestor said...

My own conclusion is that as a blogger I should take some care in how things are phrased.Hopefully my years in government service and big corporations will be of some benefit in showing how to say something without being held to it. ;-) It's easy to be clear or to be unaccountable but it's hard to be both.

btw, does your return to commenting Investoid, mean that you might also return to writing your blog? Or are you too busy making money investing instead of commenting on it?

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