Canada: OSC Explores New Capital Raising Prospectus Exemptions

  • OSC consults on possible new prospectus exemptions to broaden access to the exempt market
  • Four "concept ideas" considered: crowdfunding, an offering memorandum exemption for Ontario, and two exemptions based on investor sophistication or advice
  • Dealer or adviser registration considered for funding portals

The Ontario Securities Commission has released a broad consultation paper, OSC Staff Consultation Paper 45-710 Considerations for New Capital Raising Prospectus Exemptions, which explores four "concept ideas" relating to new prospectus exemptions in Canada. This includes the OSC's preliminary thoughts about crowdfunding.

The Canadian Securities Administrators (CSA) have been engaged for some time in a review of the most commonly used prospectus exemptions for private placements in Canada (see Blakes Bulletin on Securities Regulation: Private Placement Exemption Criteria To Be Reviewed, November 2011). This latest paper from the OSC represents a broadening of consultation in this area, showing that the Canadian regulators are thoroughly examining how to foster greater access by start-ups and small and medium-sized enterprises (SMEs) to capital markets, as well as possibilities to provide investors with more access to investment opportunities through the increasingly important exempt market. It is notable that this consultation is an OSC initiative rather than a broader CSA effort, so results may not be harmonized.

The OSC Staff paper looks at the development of the exempt market in Ontario and considers both benefits and challenges of several possible new or adjusted prospectus exemptions. The OSC examines how other jurisdictions, including the U.S., the U.K. and Australia, have addressed similar or other prospectus exemptions. The OSC explores in detail four main concept ideas, "solely for discussion purposes." It is careful to note it may not introduce exemptions in this or any other form.


Crowdfunding involves funding a project by raising small amounts of money from a large number of people over the Internet. The crowdfunding concept idea would be available for both reporting and non-reporting issuers but not for investment funds or selling securityholders.

Issuers would be subject to restrictions. Since the objective is to facilitate capital raising for SMEs in Canada, the issuer, its parent and its principal operating subsidiary must be incorporated or organized, and have its head office, in Canada. The issuer would be limited to raising up to C$1.5-million in a 12-month period, through distributions of common shares, non-convertible preferred shares, non-convertible debt securities that are linked to a fixed or floating interest rate, and securities convertible into common shares or non-convertible preferred shares. The issuer would not be permitted to advertise an investment except through the funding portal or on the issuer's website.

This exemption could be used to sell securities to any investor, but investment limits would be imposed for each investor of C$2,500 in a single issuer and C$10,000 during any calendar year. A streamlined information statement would be provided at the point of sale, describing risks and providing information about the offering, the issuer, the funding portal and any other registrant involved. One year of financial statements (either audited or certified by management depending on the proceeds of the distribution) would also be provided. Investors would sign a risk acknowledgment form and would be provided with statutory rights in the event of a misrepresentation as well as a two-business-day "cooling off" period. Issuers would provide investors with annual financial statements and keep prescribed records.

All investments would be made through a funding portal registered as a dealer or adviser. The OSC would consider exempting funding portals from certain dealer or adviser registration requirements. The funding portal would be prohibited from offering investment advice or recommendations, soliciting, and compensating employees and others for solicitations or based on the sale of securities. Given its "gatekeeper" role, the funding portal would be required to take reasonable measures to reduce the risk of fraud.

Offering Memorandum Exemption

Ontario currently does not have the offering memorandum (OM) prospectus exemption available in all other Canadian jurisdictions under section 2.9 of National Instrument 45-106 Prospectus and Registration Exemptions. The OSC's concept idea for an OM exemption would be similar to the crowdfunding exemption. Distribution of securities would be based on a limited disclosure document. Two notable differences from the crowdfunding exemption would be that (i) an investment under the OM exemption would not need to be conducted through a funding portal, and (ii) there would be no requirement for the involvement of a registrant (unless the issuer or any intermediaries are in the business of trading in securities).

Sophistication from Industry Experience

The third concept idea would exempt distributions to "sophisticated" investors, without restrictions on the type of security, the size of the investment or the offering. However, the investor must have worked in the investment industry for at least one year in a position that requires knowledge of securities investments and must have a chartered financial analyst (CFA) designation, a chartered investment manager designation or an M.B.A. The investor would be provided with basic information about the offering (such as a term sheet) and would execute a risk acknowledgment.

Advice from Investment Dealer

The fourth concept idea would apply where an investor has received appropriate advice from a registered investment dealer. The investor would not need to satisfy any sophistication, income or net worth criteria. This exemption would require that an investment dealer (i) is providing advice to the investor in connection with the distribution, (ii) has an ongoing relationship with the investor, (iii) has contractually agreed that it has a fiduciary duty to act in the best interests of the investor, and (iv) is not providing advice in connection with the distribution of a "related issuer" or a "connected issuer." This concept idea would not apply to other types of registrants, such as exempt market dealers, but existing prospectus exemptions would continue for distributions to portfolio managers acting on behalf of fully managed accounts.

Private Placement Reporting

To address the need for better data on exempt market activity, consultation questions are included about mandating electronic filing of Form 45-106F1 Report of Exempt Distribution and significantly expanding that report to require additional information.

Requests for Comments

To facilitate discussion and feedback, consultation questions are provided pertaining to each concept idea. A broad range of consultation questions also include ones relating to the private issuer exemption, a closely held issuer exemption and a family exemption. The consultation period is open until February 12, 2013.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Events from this Firm
27 Oct 2016, Seminar, Toronto, Canada

Please join members of the Blakes Commercial Real Estate group as they discuss five key provisions of a commercial real estate purchase agreement that are often the subject of much negotiation but are sometimes misunderstood.

1 Nov 2016, Seminar, Toronto, Canada

What is the emotional culture of your organization?

Every organization and workplace has an emotional culture that can have an impact on everything from employee performance to customer or client satisfaction.

3 Nov 2016, Seminar, Toronto, Canada

Join leading lawyers from the Blakes Pensions, Benefits & Executive Compensation group as they discuss recent updates and legal developments in pension and employee benefits law as well as strategies to identify and minimize common risks.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.