In July 2013, Ontario took a big step towards opening the market to equity crowdfunding, as Crowd Valley reported in this article, allowing a company to run an equity crowdfunding portal for social or environmental issuers. Eight months later, in March 2014, the Ontario Securities Commission (OSC), together with other provincial financial authorities (Alberta, Quebec, Saskatchewan and New Brunswick), published a joint proposal for regulations for securities crowdfunding (i.e. the Crowdfunding Exemption).
The proposal, which is now undergoing a 90-day comment period, presents the following main changes:
All in all, the proposed regulations seem to be broadly in line with similar moves in the US and the UK. The fact that different Canadian provinces are considering to adopt the Crowdfunding Exemption reflects the willingness of the different financial authorities to harmonize their regulations, in order to form an almost unified crowdfunding market. However, other important provinces, such as British Columbia, are not taking into consideration the Crowdfunding Exemption, preferring to it the Startup Exemption, which differs from the former in various ways, for instance the maximum amount companies are allowed to raise is significantly lower.
Will the new regulation pass the public comment period, allowing the birth of a Canadian securities crowdfunding market? We’ll keep you up to date.
References
Mann, A. (2014). Untangling Canada’s proposed new crowdfunding laws. Canadianbusiness.com
Sharp, A. (2014). Canada regulators propose rules for crowdfunding of startups. Reuters
Image credit: Dennis Jarvis: https://bit.ly/p/4WUDUC
- The possibility to invest through securities crowdfunding portals will no longer be restricted to sophisticated investors.
- The maximum funding companies can receive through securities crowdfunding will be set at C$ 1,5 million, in 12 months time.
- The investor cap is instead fixed at C$ 2,500 per deal, for a maximum of C$ 10,000 per year.
- The access to securities crowdfunding portals will be restricted only to businesses that have a strong Canadian connection, that is they either are incorporated in Canada or have head offices in the country or their board is for the majority composed of Canadian residents.
- Raising capital through securities crowdfunding is not restricted to any specific kind of company and firms which are listed on stock markets are also eligible.
- Issuers do not have to prepare any expensive prospectus.
- Crowdfunding platforms will need to register with the regulator and comply with a series of stringent standards, such as capital requirements and background checks on issuing companies.
All in all, the proposed regulations seem to be broadly in line with similar moves in the US and the UK. The fact that different Canadian provinces are considering to adopt the Crowdfunding Exemption reflects the willingness of the different financial authorities to harmonize their regulations, in order to form an almost unified crowdfunding market. However, other important provinces, such as British Columbia, are not taking into consideration the Crowdfunding Exemption, preferring to it the Startup Exemption, which differs from the former in various ways, for instance the maximum amount companies are allowed to raise is significantly lower.
Will the new regulation pass the public comment period, allowing the birth of a Canadian securities crowdfunding market? We’ll keep you up to date.
References
Mann, A. (2014). Untangling Canada’s proposed new crowdfunding laws. Canadianbusiness.com
Sharp, A. (2014). Canada regulators propose rules for crowdfunding of startups. Reuters
Image credit: Dennis Jarvis: https://bit.ly/p/4WUDUC
About the author - Irene Tordera
Born and raised in Milan, Italy, Irene is an International Business graduate, with a strong interest for innovative ideas that can simplify our lives.
During her studies, she co-founded an online community for sportspeople and worked in marketing positions at Ogilvy & Mather Advertising and at the European Business Angel Network, in Brussels. She is a passionate blogger about crowdfunding and the startup ecosystem.
Born and raised in Milan, Italy, Irene is an International Business graduate, with a strong interest for innovative ideas that can simplify our lives.
During her studies, she co-founded an online community for sportspeople and worked in marketing positions at Ogilvy & Mather Advertising and at the European Business Angel Network, in Brussels. She is a passionate blogger about crowdfunding and the startup ecosystem.
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