Regulators mulling rules to allow crowdfunding in Canada

Matthew T. Oliver

Dec 4, 2013

Barbara Shecter

Financial Post, National Post

(Extract)

Canada’s biggest capital markets regulator is preparing rules that would allow equity crowdfunding for the first time, something early-stage companies have been clamouring for as a cheaper alternative to IPOs.

A proposed prospectus exemption to allow crowdfunding will be published by the Ontario Securities Commission in the first quarter of next year, with an accompanying “registration framework” for online funding portals, the regulator said Wednesday.

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“I do think the OSC is definitely going to move forward with some form of crowdfunding and is taking it very seriously,” Matthew Oliver, a securities lawyer at Osler, Hoskin & Harcourt LLP, said in an interview Wednesday.

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The details of what the OSC will propose in the new year aren’t known, and Mr. Oliver suggested the Canadian regulator may base its proposal in part on the results of a U.S. Securities and Exchange Commission consultation on crowdfunding that is scheduled to wrap up in early 2014. A consultation paper circulated by the OSC last year suggested capping the amount raised by a single entity at $1.5-million in any 12-month period, and limiting the amount pledged by individual investors.

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The OSC is considering additional exemptions to allow capital to be raised. Some of these exemptions, such as allowing friends and family and existing securities holders to purchase equity without a prospectus vetted by regulators, are already popular in Western Canada and Quebec. The OSC proposals, including an exemption that would allow the sale of securities using a simplified offering memorandum instead of a prospectus, will also be subject to the 90-day comment period.

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