Crowdfunding -- the raising of capital, typically through small
individual investments on an online platform -- has obvious appeal:
it allows investors to take a relatively risk-free flutter, if the
investment is small; and it provides smaller issuers, in
particular, the ability to raise capital from a wide investor base.
There are some obvious risks, of course, especially if larger
investments are at stake. Fraud is the obvious one, but so are
projects that raise some -- but not all -- of the capital they
The Ontario Securities Commission has ventured
cautiously into crowdfunding, having considered the issues in a
December 2012 consultation paper. In the Matter of MaRS VX
(OSC, 17 June 2013) grants relief to a not-for-profit subsidiary of
MaRS Discovery District from certain know-your-client and
suitability requirements that would permit it to operate a
crowdfunding platform, albeit one that is a fairly limited in
scope. The filer will be permitted to operate an online portal to
connect accredited investors with 'social impact' or
'environment impact' issuers that 'aim to solve social
or environmental challenges in Ontario'. A public web portal
will contain information about the filer and how to qualify as an
investor through a separate, private portal. In order to access the
private portal, accredited investors will be required to provide
suitable identification and sign an investment agreement in which
they acknowledge their acceptance of the investment risks disclosed
to them through the portal. Issuers will be required to acknowledge
their compliance with disclosure and other securities law
requirements. The filer, for its part, will merely provide the
platform to connect investors and issuers, and will not recommend
or trade in securities itself.
While the OSC suggests that the MaRS VX order should
'not necessarily be viewed as a precedent for other filers in
Ontario or in other jurisdictions', it probably is to be
regarded as a template for future crowdfunding initiatives in
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