On March 20, 2014, the Canadian Securities Administrators created significant buzz by proposing rules which would allow investors in large parts of the country to participate in equity crowdfunding.
- Securities regulators in each of Manitoba, New Brunswick, Nova
Scotia, Ontario, Quebec and Saskatchewan (the Participating
Jurisdictions) published for comment proposed Multilateral Instrument 45-108 Crowdfunding
Prospectus Exemption and Crowdfunding Portal Requirements
(Proposed MI 45-108).
This is a specific equity crowdfunding framework that builds on the model proposed and published by the Ontario Securities Commission in December 2012, but now has five other jurisdictions joining Ontario in considering this proposed capital raising initiative. - Securities regulators in Manitoba, New Brunswick and Nova
Scotia also concurrently published prospectus and registration
exemptions (the Start-up Crowdfunding
Exemption) applicable to equity crowdfunding.
This exemption was modelled upon an existing Saskatchewan General Order 45-925 Saskatchewan Equity Crowdfunding Exemption that became effective December 6, 2013. The Start-Up Crowdfunding Exemption is being considered by the Participating Jurisdictions except Ontario. - While the British Columbia Securities Commission (the BCSC) did
not participate in the publication of the Start-Up Crowdfunding
Exemption, it did publish BCSC Notice 2014/33, which requested comment on
whether it should adopt a similar exemption in British
Columbia.
The BCSC its view that a form of equity crowdfunding is already permitted in British Columbia with the use of the offering memorandum exemption in Section 2.9 of National Instrument 45-106 Prospectus and Registration Exemptions (NI 45-106).
New Tools for an Old Concept
While the popularity of equity crowdfunding is relatively new, the discussion surrounding the sale of securities over the internet is not. In 1999, the CSA adopted National Policy 47-201 Trading in Securities Using the Internet and Other Electronic Means, which set out the views of securities regulators regarding the use of the internet. As that policy makes clear, even in the absence of Proposed MI 45-108 and the Start-up Crowdfunding Exemption, trades can done today over the internet in reliance on existing exemptions, such as the accredited investor exemption in section 2.3 of NI 45-106. However, there can be no denying that such an approach can prove cumbersome, and the proposed tailor-made exemptions are therefore worthy of careful consideration.
Each of Proposed MI 45-108, the Start-up Crowdfunding Exemption and BC Notice 2014/33 are open for comment until June 18, 2014.
Future Blog Posts
Future blog posts will examine this new eco-system of capital raising and provide insight and commentary so keep reading.
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.
