The Ontario Securities Commission (OSC) recently published OSC Staff Notice 33-738. The Staff Notice
contains commentary regarding Internet platforms and other
"matchmaking" services that are run by persons who are
not dealers or advisers in the conventional sense. This might
include, for example, "angel networks" that connect
start-up companies with angel investors, either through on-line
matchmaking sites or more traditional methods. OSC Staff
caution that persons engaged in this activity may be "in the
business" of trading or advising in securities. If so,
they are required to register as dealers or advisers.
The Staff Notice provides examples of entities which are
considered in the business of trading or advising (and therefore
must register). These examples include:
An internet platform that seeks to showcase
investment opportunities to investors in return for fees from
issuers and dealers that advertise on the platform;
An angel investor organization or investment
club that identifies investment opportunities for members, assists
with due diligence on investments, and provides updates on the
performance of investments in return for membership fees and, in
some cases, fees and/or broker warrants granted as compensation on
investments (collectively broker-type compensation); and
"Finders" who participate in private
placements in return for broker-type compensation.
Unless registered or granted exemptive relief by the OSC,
entities that offer these services may not be operating in
compliance with Ontario's securities laws. Start-ups
should also be aware of this when considering the appropriate use
of on-line platforms, angel groups or finders to work with when
OSC Staff also emphasized that the Commission continues to
support innovative business models, and that the Commission is open
to considering exemptive relief from dealer requirements if
investor protection concerns can otherwise be adequately
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