Saskatchewan’s Financial and Consumer Affairs Authority (FCAA) is the first Canadian securities regulator to propose allowing equity crowdfunding.
The FCAA Monday proposed a new equity crowdfunding exemption, which would enable companies to make two offerings, of up to $150,000 each, per year. Investors would be limited to making $1,500 investments, and both the business and the investor must be based in Saskatchewan.
The regulator would not charge any fees for offerings, but companies seeking to raise capital would be required to inform the regulator of their intentions 10 days before an offering is posted online, and they must report sales within 30 days of the closing of the offering. Additionally, companies seeking funds would not be allowed to charge any sales commissions on the offering. To rely on the exemption, the company cannot be a reporting issuer, or an investment fund, and cannot offer derivative securities.
Proposed portals would also have to file with the commission 30 days before they intend to begin operations. They will not be able to provide advice, and must provide issuers’ offering documents and a risk warning to investors, which must be acknowledged by investors.
The proposed new exemption is out for comment until November 6.
“We believe the Saskatchewan equity crowdfunding exemption will help small businesses and start-ups raise money, while still protecting investors by, among other things, limiting the amount of money individual investors can lose,” it says.
“FCAA also believes this is a unique opportunity for people who are new to investing to gain some experience,” it adds.
The Ontario Securities Commission (OSC) is also currently considering its own equity crowdfunding exemption, as are various other regulators.