On September 21, 2017, following the results of a stakeholder survey conducted over the course of the year to date, the British Columbia Securities Commission (BCSC) announced changes to the existing equity crowdfunding rules found in British Columbia Instrument 45-535 – Start-up Crowdfunding Registration and Prospectus Exemptions (BCI 45-535) to address two of the most common pain points felt by investors and issuers.
The first amendment is a step to address concerns with respect to a lack of harmonization across provinces by creating a regime to allow access for investors and issuers across the B.C. and Alberta border. The amendments to BCI 45-535 provide that Alberta as a "participating jurisdiction" and include specific reference to Alberta Securities Commission Rule 45-517 Prospectus Exemptions for Start-up Businesses (ASC Rule 45-517) in the definition of the term "corresponding start-up crowdfunding order". A similar change to ASC Rule 45-517 was announced on October 3, 2017, by the Alberta Securities Commission. As a result, a British Columbia issuer can now sell securities to an investor in Alberta and an Alberta issuer can now sell securities to an investor in British Columbia relying on both BCI 45-535 and ASC Rule 45-517; however, the issuer will be held to the most restrictive limit as between the two instruments. For example, to comply with BCI 45-535 the B.C. issuer would be required to use a funding portal and, to comply with ASC Rule 45-517 that portal would be required to be registered either as an investment dealer or an exempt market dealer.
The second improvement, addressing concerns from survey respondents with respect to investment limits, is an amendment to raise an investor's limit from $1,500 to $5,000, but only if the investor has obtained advice from a registered dealer that the investment is suitable for them.
While these amendments are clearly a step in the right direction, they will have limited application to market participants in the short term. As noted above, these two changes are relevant in the context of an equity crowdfunding campaign conducted through a registered dealer. Currently, there are 10 start-up crowdfunding portals permitted to operate in British Columbia according to the BCSC website, only one of which is currently registered as an exempt market dealer in both British Columbia and Alberta.
Further information about BCI 45-535, including user-friendly guides, can be found on the BCSC's Start-Up Crowdfunding webpage.
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