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Equity Crowdfunding - Canadian Securities Commissions looking at new exemptions

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Given the growing popularity of crowdfunding as a method of raising funds, it was only a matter of time before the various securities commissions in Canada weighed in on the matter.

Additional Information:

Company: InvestmentPitch
Website: http://www.investmentpitch.com/
Date Published: Jul 3, 2014
Transcript: Available

Video Transcript:

I’m Samantha Deutscher for InvestmentPitch Media

Given the growing popularity of crowdfunding as a method of raising funds, it was only a matter of time before the various securities commissions in Canada weighed in on the matter.

The Ontario Securities Commission, along with Manitoba, New Brunswick, Nova Scotia, Saskatchewan and Quebec are looking at an exemption that would allow reporting and non-reporting issuers, which includes both public and private companies, to raise up to $1.5 million during any 12-month period.

An investor would be limited to investing $2,500 in any individual company and no more than $10,000 allocated among several companies in any calendar year.

There are several proposed restrictions, including:

- the company must be incorporated in Canada, with its head office in Canada, and a majority of its directors residing in Canada

- the company must provide investors with an offering document, which includes a business plan, and certain financial information

- the company must provide audited financial statements if it has raised more than $500,000 and has expended more than $150,000 since incorporation

- the offering will be limited to a period of 90 days, and provide a minimum size with corresponds with a description of the use of funds, and no funds can be released until the minimum amount has been received

A major restriction arises because the funds must be raised through authorized portals which must comply with a list of requirements including registration, capital, insurance and other regulatory requirements.


There is also another fundraising proposal, called the Start-up Crowdfunding Exemption, which is being considered by the British Columbia Securities Commission and certain other provincial regulators, but not Ontario, which is aimed at non-public issuers which are at a very early stage of development.

It would have the following, less onerous restrictions:

- companies can use the exemption twice in a 12-month period and may raise up to $150,000 per offering

- investors are limited to $1,500 per investment

- companies are not required to produce financial statements

- portals will be exempt from registration but will be required to meet certain requirements including filing a form with the applicable securities regulator a minimum of 30 days before raising any funds

As the comment period for both these proposals has now passed, everyone is anxiously awaiting the final regulations.

Both these fund raising proposals could result in a company acquiring a shareholder base of 150 or more, which could be considered as the first step towards a listing on a Canadian Securities Exchange,

I’m Samantha Deutscher for InvestmentPitch Media
For more video news, and to view our disclaimer, be sure to visit our website www.investmentpitch.com.
This video is for information purposes only and it is not a recommendation to buy or sell any securities.