In an effort to facilitate startup financings, the Canadian Securities Administrators (CSA) are adopting national rules for securities crowdfunding.
Since securities regulators first crafted rules to allow crowdfunding in 2015, there have been a variety of slightly different approaches in various provinces across the country. Now, the CSA is adopting a single set of rules to create a national framework.
“CSA staff have heard from market participants that a harmonized regulatory framework tailored for securities crowdfunding available across Canada would foster the use of securities crowdfunding as an alternative for start-ups and early stage issuers to raise capital,” the CSA said in a notice.
Since 2015, there have been approximately 110 distributions made under the existing crowdfunding exemptions, with an average investment of $576 per investor, the CSA reported.
The new rules, which take effect Sept. 12, aim to make crowdfunding a more useful fundraising option.
“These rules expand the ability of small businesses and start-ups to use securities crowdfunding to gain access to capital,” said Louis Morisset, chair of the CSA and president and CEO of the Autorité des marchés financiers (AMF) in a release.
In addition to fully harmonizing the rules, the CSA has made a number of changes to the existing rules to make crowdfunding more effective, such as increasing the maximum amount an issuer can raise in a 12-month period to $1.5 million from $500,000, and raising the maximum investment to $2,500 from $1,500.
The new rules also add some investor protections. For instance, they require funding portals to certify semi-annually that they have enough money to operate for at least the next six months, and they require issuers to have operations — not just plans to acquire an unspecified business. Issuers will also face statutory liability similar to the offering memorandum exemption.