{"id":1765,"date":"2013-05-10T00:00:00","date_gmt":"2013-05-10T00:00:00","guid":{"rendered":"https:\/\/perlaw.ca\/2013\/05\/10\/is-crowdfunding-investment-coming-to-ontario-by\/"},"modified":"2019-07-23T20:56:28","modified_gmt":"2019-07-23T20:56:28","slug":"is-crowdfunding-investment-coming-to-ontario-by","status":"publish","type":"post","link":"https:\/\/perlaw.ca\/fr\/2013\/05\/10\/is-crowdfunding-investment-coming-to-ontario-by\/","title":{"rendered":"Is Crowdfunding Investment Coming to Ontario?"},"content":{"rendered":"

The passage of the JOBS Act<\/em> in the United States, which includes provisions for crowdfunding investment, has led to suggestions that Ontario should also allow crowdfunding investment under the Securities Act<\/em>.\u00a0 The Ontario Securities Commission (the \u201cOSC\u201d), has taken the first step towards considering a potential crowdfunding exemption as part of its wider review of the exempt market in Ontario.\u00a0 As part of this review, the OSC has set out a crowdfunding exemption concept (the \u201cmodel exemption\u201d).\u00a0 This concept will undoubtedly undergo further change as a result of investor feed back and the OSC may in the end decide not to introduce a crowdfunding exemption at all.\u00a0 Nevertheless, the model exemption gives a good idea of the key elements the OSC would like to see in a crowdfunding investment exemption, if it is ever introduced.\u00a0 These elements include:<\/p>\n

The Issuer<\/em> – The issuer must be a company incorporated in a Canadian jurisdiction.\u00a0 The model exemption would not be available for investment funds.<\/p>\n

The Security<\/em> – Only four relatively simple classes of securities (such as common shares or securities convertible into common shares) could be distributed under the model exemption.<\/p>\n

Distribution – <\/em>The model exemption would only apply to distributions by an issuer in securities of its own issue.<\/p>\n

Size of Investment<\/em> – A purchaser\u2019s investment in securities of a particular issuer would be limited to $2,500.\u00a0 In addition, a purchaser\u2019s total investment under the model exemption in a calendar year could not exceed $10,000.<\/p>\n

Size of Offering<\/em> – An issuer could not raise more than $1,500,000 in a 12 month period under the model exemption.<\/p>\n

Distribution Disclosure<\/em> – A purchaser must be provided with an information statement at the time of distribution.\u00a0 The information statement would contain \u201cfinancing facts\u201d, \u201cissuer facts\u201d and \u201cregistrant facts.\u201d\u00a0 The model exemption would specify that the information statement falls within the OSC definition of an offering memorandum and therefore gives the purchaser certain rights under Section 130.1 of the Securities Act.<\/em><\/p>\n

Ongoing Disclosure<\/em> – The issuer must provide its security holders with annual financial information within 120 days from its fiscal year end.\u00a0 The issuer must maintain books and records that are available for inspection by both purchasers and OSC staff.<\/p>\n

Risk Acknowledgement<\/em> – A purchaser must sign a stand alone risk acknowledgement form in respect of the purchase.<\/p>\n

Registrant Involvement<\/em> – Distributions would have to be made through a registered funding portal.\u00a0 The portal must be registered in an existing dealer or adviser category and would play a \u201cgatekeeper role\u201d in obtaining regulatory background checks on the issuer and its principals.<\/p>\n

Withdrawal Right<\/em> – The model exemption would give purchasers the right to withdraw within two business days of the distribution.<\/p>\n

Reporting Requirements<\/em> – A distribution under the model exemption would trigger a requirement to file a report of exempt distribution.\u00a0 The filing fee for non reporting issuers is $500 (plus HST) at the time of writing.<\/p>\n

Resale Restrictions<\/em> – Securities distributed under the model exemption would be subject to a restricted sales period.\u00a0 This period would be indefinite where the issuer is not a reporting issuer.<\/p>\n

So, the answer to the question in the headline is \u201cmaybe\u201d.\u00a0 If it does, the OSC exemption will probably embody most of the above elements.\u00a0 But, any such exemption will be some time in arriving.\u00a0 If you are interested in raising funds through crowdfunding, you will have to stay tuned.\u00a0 If you have any questions, please feel free to contact me at the coordinates below.<\/p>\n

\n

David J. Lowdon is a lawyer in our Business Law Group.\u00a0 Dave can be reached at 613.566.2809 or\u00a0dlowdon<\/em>@perlaw.ca<\/em><\/a>.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

The passage of the JOBS Act in the United States, which includes provisions for crowdfunding investment, has led to suggestions that Ontario should also allow crowdfunding investment under the Securities Act.\u00a0 The Ontario Securities Commission (the \u201cOSC\u201d), has taken the first step towards considering a potential crowdfunding exemption as part of its wider review of […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"wds_primary_category":0,"wds_primary_expertise_area":0,"footnotes":""},"categories":[161],"tags":[],"class_list":["post-1765","post","type-post","status-publish","format-standard","hentry","category-publications"],"acf":[],"_links":{"self":[{"href":"https:\/\/perlaw.ca\/fr\/wp-json\/wp\/v2\/posts\/1765","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/perlaw.ca\/fr\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/perlaw.ca\/fr\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/perlaw.ca\/fr\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/perlaw.ca\/fr\/wp-json\/wp\/v2\/comments?post=1765"}],"version-history":[{"count":2,"href":"https:\/\/perlaw.ca\/fr\/wp-json\/wp\/v2\/posts\/1765\/revisions"}],"predecessor-version":[{"id":3112,"href":"https:\/\/perlaw.ca\/fr\/wp-json\/wp\/v2\/posts\/1765\/revisions\/3112"}],"wp:attachment":[{"href":"https:\/\/perlaw.ca\/fr\/wp-json\/wp\/v2\/media?parent=1765"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/perlaw.ca\/fr\/wp-json\/wp\/v2\/categories?post=1765"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/perlaw.ca\/fr\/wp-json\/wp\/v2\/tags?post=1765"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}