Equity crowdfunding is coming to several provinces as Canadian securities regulators Thursday proposed two new crowdfunding exemptions.
Regulators in Ontario, Quebec, British Columbia, Saskatchewan, Manitoba, New Brunswick and Nova Scotia all proposed new exemptions that would allow equity crowdfunding in those jurisdictions. This being Canada, there’s a certain amount of disparity in what various provinces are proposing, however.
First, the authorities in Quebec, Saskatchewan, Manitoba, New Brunswick and Nova Scotia are contemplating two different crowdfunding exemptions.
One is similar to the so called “start-up exemption” already in place in Saskatchewan, which is both a prospectus exemption and a registration exemption for intermediaries. The start-up exemption could only be used by firms that aren’t reporting issuers, and is subject to relatively low limits on the amount a company can raise, and the amount that investors can risk.
The five provinces are also proposing a prospectus exemption alone, which would require distribution platforms to register to serve as intermediaries. The main difference compared to the start-up exemption is that it would be available to reporting issuers, and that it allows for higher capital raising and investment limits.
B.C. is only proposing the start-up exemption, while Ontario is only proposing the prospectus exemption. (See Investment Executive, OSC proposes four new prospectus exemptions, March 20, 2014.)
In a joint notice, the regulators in the five provinces that are proposing both exemptions suggest that they are complementary, and that the exemptions focus on different stages in the growth and business cycles of start-ups and small firms.
“We think that crowdfunding can be a viable method for start-ups and SMEs to raise capital. However, because issuers do not all have the same capital needs nor the same resources to raise capital, we propose two different crowdfunding prospectus exemptions,” the regulators say.
The participating jurisdictions are seeking comments on the proposals by June 18.