The Canadian Securities Administrators published guidance highlighting regulatory concerns with certain asset or business acquisitions, primarily in venture markets, where reporting issuers issue a significant number of securities to acquire assets or businesses that appear to have little or no actual value or operating history at apparently inflated prices. The guidance warns that misleading disclosure in connection with these transactions could constitute market manipulation and reiterates that it does not introduce new requirements. CSA Staff Notice 51-366 points to risks including misleading disclosure or misrepresentations in an issuer’s continuous disclosure record, a lack of a reasonable basis for the value ascribed to the target asset or business, and potentially untrue or unbalanced promotional campaigns supporting the acquisition. It also highlights concerns where issuers record some or all of the consideration as intangible assets or goodwill based on unreasonable or unsupportable assumptions and then impair those amounts shortly after the acquisition, and indicates that staff will continue to apply additional regulatory scrutiny to acquisitions that raise these concerns.
Canadian Securities Administrators 2025-07-03
Canadian Securities Administrators issue guidance flagging misleading disclosure and inflated valuations in certain asset or business acquisitions
The Canadian Securities Administrators issued guidance on concerns about asset or business acquisitions in venture markets, where issuers may issue securities for assets with little value or history at inflated prices. CSA Staff Notice 51-366 warns of risks like misleading disclosures, unsupported valuations, and promotional campaigns, emphasizing these practices could constitute market manipulation. The guidance does not introduce new requirements but indicates ongoing regulatory scrutiny for such acquisitions.