Campaign Marketing Compliance Guide

Equity crowdfunding has allowed everyday people to invest in private companies - opportunities previously reserved only for “institutional” and “accredited” investors. With the door now open to retail investors, the spotlight is on promotional materials to ensure they are accurate and contain reasonable information to inform retail investors about their investment decision. 

All external and internal marketing materials regarding your investment opportunity must comply with securities legislation and the Canadian Code of Advertising Standards. To ensure that your materials are compliant across the board, your Campaign Manager and FrontFundr’s Compliance Officer will review all marketing materials to be used for your campaign. 

This handbook will provide you with a clear framework for creating compliant marketing materials and assist you with your compliance responsibilities. To make it easier to navigate, we’ve divided the guidelines into three sections:

1. Restrictions & Requirements: This section outlines the key rules and limitations for your marketing materials, ensuring compliance with relevant securities laws and advertising standards.
2. Disclosures Guide: This section provides a breakdown of the suggested disclosures required for transparency. 
3. FrontFundr Review: This section explains the review process conducted by your Campaign Manager and FrontFundr’s Compliance Officer to ensure your materials align with regulatory standards.

By following the guidance in these sections, you can confidently create marketing materials that meet requirements while effectively communicating your investment opportunity.

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Restrictions and Requirements

Although the preparation of materials is not only an exercise of simply excluding restrictions and containing requirements or disclaimers, it is a good starting point to ensure that materials meet the below criteria. Once you have submitted your materials for review, FrontFundr will review and assess compliance for each item.

Restrictions

1. Materials must not contain any misrepresentation or false statement. The use of exaggeration, innuendo, or ambiguity in an oral or written representation of a material fact, or other deceptive behavior relating to a material fact might be a misrepresentation. 

2. Materials must not include financial information (historical or projected) unless in compliance with the requirements. 

3. Materials should not make a definitive claim about the public listing of the securities unless supported by a definitive listing agreement. 

4. Issuer’s materials should not specifically discuss the offering, but rather discuss the business and opportunity. 

5. Materials cannot imply that a regulatory body has approved the offering for distribution or, imply that a regulatory body has approved the offering for distribution by virtue of its inclusion on the platform. 

6. Issuer’s materials should not make statements about

• the expected future value of the offered securities or the Company;
• guarantee of return with limited or no risks;
• the need to act now ( i.e., fear of missing out statements (FOMO) such as “Don’t miss out on this opportunity” or “Act now before you run out of time”) - however, it is acceptable to indicate a time frame on campaign milestone posts;
• inside/private information (i.e., the same information must be shared with all potential investors);
• exclusivity of investing (e.g., “this opportunity is only available for select people”);
• encourage investing because certain people invested (i.e., “ VCs have invested”, etc.)

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Examples of Restricted Activities 

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Requirements 

1. Materials should speak to the quality of the product or service provided by the company. 

2. Materials should highlight the opportunity following the guidelines provided and direct interested parties to the FrontFundr website to learn more about the investment itself and to review offering documents.

3. All promotions which utilize paid sponsorship (outside influencers) must provide clear disclosure within the promotion itself. 

4. If the company has not earned revenue, issuers must provide a framework for how they make revenue and how much they could potentially make on a per-transaction basis – or some other unit-denominated metric. Issuers may provide an opinion on why they are in a strong position to succeed with a revenue generation plan following a raise.

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Forecasts & Projections

Forecasts and projections are forward-looking information that can be beneficial for investors to make data-driven decisions. CSA Staff Notice 51-356 Problematic promotional activities by issuers outline that an issuer must:

• Identify forward-looking information as such.
• Caution users that results may vary from the forward-looking information and identify material risk factors that could use actual results to differ materially from the forward-looking information. 
• State the material factors or assumptions used to develop the forward-looking information. 

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An issuer should consider the following items if providing projection-related information in their marketing materials: 

• Is the forecast in line with the value drivers of the business?
• What are the assumptions?
• Is the income forecasted consistent with the presentation of the forecasted balance sheet and cash flow statements?
• Who has prepared the forecasts and for what purpose?
• Is the revenue growth realistic?
• Who are the customers? 
• What are the results of the years prior to now?
• Is revenue growth of X percentage, per annum, sustainable? 
• Does Gross Margin increase/decrease, and why?
• How was financing reflected?
• How do the forecasting models fit with any covenants? 

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Ensure that projections and forecasts on materials have a reasonable basis and are compliant with the guidelines below:

5. The Company must have earned revenue in order to include any projections in any format (graph, table, text, etc).

6. If projections are supported by audited financial statements, a maximum of 4 projected years are permitted. 

7. If projections are supported by unaudited financial information, it must be clearly marked as so, and can only contain up to a maximum of 2 projected years. 

8. Projections must contain the same number of historical results as it does projected results (i.e., 1 year of historical financials for every 1 year projected). 

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Projections should avoid a  ‘hockey stick’ configuration.
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Disclosures Guide 

This guide contains disclosures for eligible issuers offering securities under crowdfunding exemptions.  These disclosures must be inserted into the materials, depending on the specific content of the materials or the means of distribution. 

All the disclosures must be eligible and positioned so that readers are provided with the opportunity to review them. For the campaign page or digital content, this means at the bottom of the page with an asterisk as needed. For pitch decks, the disclaimers must follow the title slide and for videos, they should be presented in the opening with adequate time for the audience to thoroughly read and review. 

The following information is not legal advice:

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Examples of Disclosures on Campaign Materials 

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Campaign Page Disclosure Example

Disclosures for HOVR’s campaign page are easy to read and positioned at the bottom of the page. A forward-looking statement disclosure was added as the campaign page contained discussions about the future business. Offering disclosure was added as this opportunity was open to retail investors, and also directed interest in the offering terms to the appropriate legal documentation. Testimonials disclosure was included because the campaign page included testimonials from customers and previous investors.

Pitch Deck Disclosure Example

Disclosures for pitch decks should be presented right after the title slide. Only include disclosures that are relevant to the content of the deck itself. Blossom Social included a forward-looking statement disclosure and a testimonial disclosure as the pitch deck contained discussions about the future of the business and testimonials from users and previous investors.

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Campaign Video Disclosure Example

Disclosures for campaign videos should be presented at the beginning of the video. Only include disclosures that are relevant to the video itself. If only one or two disclosures are relevant to the video, you can include them as a footnote. The Fort Distillery presented their forward-looking statement disclosure at the bottom of the screen for 30 seconds.

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FrontFundr Review

All materials distributed to the public about the raise must be reviewed beforehand. Please email your dedicated Campaign Manager with any marketing material submissions. 

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Review Criteria

In addition to the criteria elsewhere in this Handbook, upon submission, FrontFundr will review materials with the following criteria in mind. Please note that approval by FrontFundr does not guarantee that materials are fully compliant with applicable securities legislation. 

• Do materials contain inaccurate or outdated information, omit any material facts, or contain otherwise false or misleading information? 
• Do materials contain unjustified promises of specific results, that the investment is reliable and secure, ensures a safe and steady return, or is it a means towards capital preservation?
• Are unrepresentative or irrelevant statistics used to make unwarranted or exaggerated claims?
• If materials contain any forecasts or forward-looking information, is it clearly labeled as such and in compliance with FrontFundr requirements?
• Do materials reference the success of past introductions or testimonials from people regarding the merits of the security (testimonials speaking to merits of the business are permitted) 
• Do materials imply that the security may be or will be listed or quoted on any trading platform or exchange? 

Securities legislation in certain jurisdictions prohibits any person from making certain representations to a purchaser of securities, including an undertaking about the future value or price of the securities. In certain jurisdictions, these provisions also prohibit a person from making any statement that the person knows or ought reasonably to know is a misrepresentation. 

Guidelines can be found in the federal competition bureau’s Competition Act. 

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We hope this guide will equip you with the necessary guidelines and disclosures to ensure all your communications are compliant with the securities regulations. Please note that the guidance in this document does not constitute legal advice. Please obtain independent legal advice to review all offering materials before distribution.

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