Securities regulators have settled with a technology firm and its CEO over allegations of failure to meet continuous disclosure obligations by issuing excessively optimistic press releases.
A hearing panel of the Ontario Securities Commission (OSC) approved a settlement agreement with Electrovaya Inc. and Sankar Das Gupta, the firm’s president and CEO, that will see the firm enhance its disclosure controls and corporate governance. Gupta will pay a $250,000 penalty and is banned from serving as a director or officer of any company other than Electrovaya for one year.
The sanctions stem from regulatory allegations that Electrovaya issued unbalanced press releases and failed to properly update its disclosure record. The OSC says that Electrovaya issued five press releases in 2016 that announced significant new business relationships. “None of the press releases contained balanced disclosure discussing the nature of the arrangements (which were often non-binding) or the related risks, contingencies or barriers to realization,” the OSC stated.
Additionally, the OSC says that the firm failed to update its disclosure record when it became clear that previously disclosed revenue estimates would not be met.
In approving the settlement, the panel noted that the proposed sanctions are “within a reasonable range of appropriate sanctions.” Prior to reaching the deal with the regulators, Electrovaya appointed an independent director to its disclosure committee, revised its disclosure policy and agreed to take further remedial steps, including retaining a consultant to review its governance and controls (which will be paid by Gupta) and to appoint an independent chair.
“The administrative penalty that has been paid and these undertakings make manifest Dr. Das Gupta’s acceptance of responsibility for Electrovaya’s admitted disclosure failings and their correction, and for its ongoing governance and continuous disclosure obligations,” the hearing panel noted.
Said Huston Loke, director of corporate finance at the OSC: “We expect public companies and their directors and officers to provide factual and balanced information to investors, and to disclose any events or circumstances that are likely to cause actual results to materially differ from previously disclosed forward-looking information. This protects the integrity of the capital markets and is information that is critical to enabling investors to make an informed decision about whether to buy, sell or continue to hold securities in the company.”
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