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Detail shot of an old share certificate
Detail shot of an old share certificate

Choosing stocks

Where to get information on a public company Add to ...

Before buying a stock, research the company. A good place to start is by reading the company's disclosure documents.

Disclosure documents

Provincial securities commissions require public companies to file documents such as:

These disclosure documents contain information that can help you to assess a company’s management, products, services, finances, future prospects and risks. Learn more about disclosure documents.

Make sure the documents you review are up to date. A lot can happen within a company even in a few weeks or months.

Exceptions to the prospectus rule

Usually, when a public company wants to raise money from the public by selling securities, it must submit a prospectus to regulators. It may not have to do this if any of the following 3 conditions apply:

  1. It is selling stock to a small number of accredited investors. To qualify as an accredited investor in Ontario, you must have, before taxes, either:

    • more than $1 million in financial assets such as cash and securities, but not including your home, or

    • annual personal income of more than $200,000 (or $300,000 if combined with your spouse) for each of the past 2 years, and expect the same this year.

  2. The company is seeking investment from only private sources (e.g., a spouse or close family member, or a close personal friend of the company founder), to a maximum total of 50 such investors under the private issuer exemption.

  3. Investors are investing at least $150,000 in cash at the time of a trade.

If disclosure documents are late or incorrect

If a public company files a disclosure document late or information is incorrect, the securities commission may require the company to refile or correct the document. In some cases, it may issue a cease trade order. A cease trade order can suspend all trading in a company’s securities, or prohibit individuals and companies from trading in certain or all securities.

If you hold stock in a company that has been ordered to stop trading, find out if it has any plans to apply to have the order removed. In some cases, the company may file for bankruptcy.

To find out more:

Warning: Don't invest if a salesperson asks you to lie about being an accredited investor on a subscription form, or hints that the company will soon list on a stock exchange, with a much higher share price than what’s being offered to you. These types of tactics are often associated with "pump and dump" scams, which artificially drive up the price of a stock. After some time, the price often drops, and you could lose your money.

Other company sources

Here’s what you can learn from other company sources.

1. Annual reports

  • Whether the company is making or losing money and why

  • Information about the company's operations and financial statements

  • Comments from the president or chief executive officer on how the company did over the past year, as well as industry trends and events that may have affected stock performance.

2. News releases

  • Information about what the company considers important enough news to release to the public. Examples: new contracts, mergers and acquisitions, management changes and earnings releases.

3. Company website

  • Current news, annual reports, quarterly statements and past news releases

  • Speeches and presentations by executives and analysts' reports

  • Industry reports

  • Webcasts of conference calls with analysts

  • Telephone conference calls available to the public

If information a company tells you turns out to be wrong or misleading, consult the prospectus (if the company is required to file one). It will tell you your legal rights to stop a purchase or to sue for damages. These rights tend to be limited, so it's important to do your research before buying a stock.

Securities regulators

Here are 3 things you can do to find out if a company has been in trouble with a stock exchange or securities commission:

  1. Check with the Investment Industry Regulatory Organization of Canada (IIROC) – If a company has been accused of breaking an exchange rule or regulation, IIROC will report the outcome of the disciplinary hearing.

  2. Check with your provincial securities commission – Many report information about hearings on their websites. Example: Ontario Securities Commission.

  3. Read Canadian Securities Administrators (CSA) Investor Alerts – These bulletins can help you find out about the latest investment frauds and scams.

Other sources of information

  • Your investment firm – If you're investing with a full-service firm, your adviser can help you choose individual stocks and give you general investing information. If you're using a discount brokerage, check the website for research and investing tools.

  • SEDAR – By law, public companies in Canada generally must file disclosure documents on the System for Electronic Document Analysis and Retrieval (SEDAR). You can search by date, document type, company name or industry sector.

  • Toronto Stock Exchange (TSX) – You’ll find up-to-the-minute information about stocks and companies listed on the TSX, annual reports and historical market data.

  • Securities Exchange Commission (SEC) – The SEC is the U.S. securities regulator. You’ll find information on U.S. stocks.

  • Third-party websites – You can get information on past stock prices and trends from a variety of websites. Examples: Globe InvestorMorningstarStockwatchYahoo Finance. You may have to pay a fee in some cases.

There’s a wealth of information online about stocks and plenty of advice about what stocks to buy. But how do you know who to trust? Find out as much as you can about the background and expertise of the person or firm who is offering the advice. Are they profiting from giving this advice? The more you know about the source, the better you can assess the risk.

Content in this section is provided in partnership with Investor Education Fund, a non-profit organization founded and supported by the Ontario Securities Commission that provides unbiased and independent financial tools to help Canadians make better money decisions. To find out more, go to: GetSmarterAboutMoney.ca

 

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