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Scorpion venom research company did not commit misconduct, B.C. regulator rules

The B.C. Securities Commission logo in an undated file photo. The B.C. Securities Commission logo in an undated file photo.
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A Vancouver-based health sciences company that was attempting to develop synthetic scorpion venom withheld relevant information from investors, but that omission did not necessarily have an impact on the company's stock price, B.C.'s financial regulator has ruled.

A panel of the B.C. Securities Commission dismissed the allegations against PreveCeutical Medical Inc. and its CEO Stephen Van Deventer in a decision issued this week

The commission's executive director had accused PreveCeutical and Van Deventer of misconduct stemming from a news release the company issued in 2018. In the release, the company said it had raised approximately $6.5 million through a private placement, but it did not share that approximately $3.2 million of the total had already been paid or would be paid to consultants.

Panels of the BCSC have found these types of omissions to be misconduct in the past, such as when a blockchain company failed to disclose it would be paying most of the $5.4 million it had raised to consultants. 

In this case, however, the panel found that PreveCeutical's omission, while misleading, did not necessarily constitute a "material" omission that would have a significant effect on the company's market value.

"The executive director must prove on a balance of probabilities not simply that investors were misled, but also that the impact would have been sufficiently serious from the point of view of reasonable investors that the effect on market price would have been significant," the panel explains in its decision.

The panel concluded that this was "an open question" in the case of PreveCeutical's news release, in part because the company had previously disclosed publicly that only about 10 per cent of its available funds were being spent on research and development.

Reasonable investors would have felt they weren't given all of the necessary facts in the news release, the panel found, but that doesn't necessarily mean there would be a significant effect on share prices.

"Although the executive director has come close, the evidence introduced before us has not established on a balance of probabilities that the omission which has been proven was material in the sense required by the relevant provisions of the (Securities) Act," the decision reads.

For this reason, the panel dismissed the allegations against PreveCeutical and Van Deventer. 

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