
Following on from regulatory activities in the US and some European countries, Canada has now opened its market to equity crowdfunding. Or more precisely, the State of Ontario, while in the rest of the country equity crowdfunding is still not regulated.
On June 17th the Ontario Securities Commission (OSC) published its decision to allow MaRS VX, a nonprofit organization owned by MaRS Discovery District, to run an equity crowdfunding platform, which will be registered as a restricted dealer under securities legislation. As clearly stated in the OSC’s decision, MaRS VX’s objective will be
“to facilitate impact investing by bringing together via an online platform ("the Platform") accredited investors (...) in Ontario and potentially in other jurisdictions and issuers that are social impact issuers and/or environmental impact issuers in Ontario aiming to solve social or environmental challenges in Ontario”.
This means that the access to the Platform to raise capital is restricted to enterprises that have less than $25 million in revenues when registering on the Platform for the first time and that aim to create a clear social and/or environmental impact.
On the other side, the OSC’s decision restricts investment through the Platform to certain categories of investors and specifies the maximum amount each of them may invest. In particular, the following are allowed to make investments through the Platform:
Ontario was the first Canadian State to move a big step towards establishing a regulation for equity crowdfunding. However, other States have also showed an increasing interest for this financial innovation. In particular, Quebec is looking closely at the US and its JOBS Act, while in Alberta and British Columbia equity crowdfunding is de facto possible through an Offering Memorandum (OM), although this legal document gives rise to additional legal obligations for both the issuer and the agent that certifies it. Furthermore it does not allow the issuer to raise capital through an online Platform, thus preventing a full implementation of crowdfunding as we know it.
With Ontario leading the way, we hope that also the other Canadian States will soon take the first steps towards establishing equity crowdfunding, which in an SMEs-based economy - like the Canadian one - would certainly bring a breath of fresh air.
References
Ontario Securities Commission (2013). In the matter of the securities legislation of Ontario (The “Jurisdiction”) and in the matter of the MaRS VX (the “Filer”).
Koscak, B. (2013). OSC Approves Ontario-Only Crowdfunding Portal for Accredited Investors.
Vos Smith, L. (2013). Crowdfunding Alert: OSC Allows Equity Crowdfunding Platform For Ontario Accredited Investors.
Photo credit to: Al_HikesAZ. http://bit.ly/1sq31qD
“to facilitate impact investing by bringing together via an online platform ("the Platform") accredited investors (...) in Ontario and potentially in other jurisdictions and issuers that are social impact issuers and/or environmental impact issuers in Ontario aiming to solve social or environmental challenges in Ontario”.
This means that the access to the Platform to raise capital is restricted to enterprises that have less than $25 million in revenues when registering on the Platform for the first time and that aim to create a clear social and/or environmental impact.
On the other side, the OSC’s decision restricts investment through the Platform to certain categories of investors and specifies the maximum amount each of them may invest. In particular, the following are allowed to make investments through the Platform:
- “permitted clients” that have waived the know-your-client and suitability requirements. They include financial institutions and individuals owning at least $5 millions in assets, just to name a few (for a full description see here). For this group there will be no maximum amount that they may subscribe for on the Platform;
- accredited investors that are not “permitted clients” or “permitted clients” that have not waived the know-your-client and suitability requirements. In this case the investment cap for an investor is $25,000 in a single offering on the Platform in a calendar year; and $50,000 in total in all offerings on the Platform in a calendar year. However, it is possible to go over the limit for a particular offering if the investor provides the Platform with a letter from a registered dealer confirming that the latter has fulfilled the know-your-client and suitability requirements with respect to that particular offering.
Ontario was the first Canadian State to move a big step towards establishing a regulation for equity crowdfunding. However, other States have also showed an increasing interest for this financial innovation. In particular, Quebec is looking closely at the US and its JOBS Act, while in Alberta and British Columbia equity crowdfunding is de facto possible through an Offering Memorandum (OM), although this legal document gives rise to additional legal obligations for both the issuer and the agent that certifies it. Furthermore it does not allow the issuer to raise capital through an online Platform, thus preventing a full implementation of crowdfunding as we know it.
With Ontario leading the way, we hope that also the other Canadian States will soon take the first steps towards establishing equity crowdfunding, which in an SMEs-based economy - like the Canadian one - would certainly bring a breath of fresh air.
References
Ontario Securities Commission (2013). In the matter of the securities legislation of Ontario (The “Jurisdiction”) and in the matter of the MaRS VX (the “Filer”).
Koscak, B. (2013). OSC Approves Ontario-Only Crowdfunding Portal for Accredited Investors.
Vos Smith, L. (2013). Crowdfunding Alert: OSC Allows Equity Crowdfunding Platform For Ontario Accredited Investors.
Photo credit to: Al_HikesAZ. http://bit.ly/1sq31qD

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.