CPE News (6/23/2021) – Canadian Securities Administrators (CSA) announced a new national harmonized rules for securities crowdfunding.
National Instrument 45-110 Start-up Crowdfunding Registration and Prospectus Exemptions introduces a single, uniform set of rules that replaces and enhances the requirements currently in effect in Alberta, British Columbia, Manitoba, New Brunswick, Nova Scotia, Ontario, Québec and Saskatchewan.
Currently there are several startup exemptions introduced by different provincial securities regulators, creating confusion for the issuers to properly file their distributions. They include:
MI 45-108 Crowdfunding (MB, ON, QC, NB, NS)
MI 45-109 Prospectus Exemption for Start-up (AB, NU)
MCSAN 45-316 Start-up Crowdfunding (BC, SK, MB, QC, NB, NS)
BCI 45-535 Start-up Crowdfunding
ASC Rule 45-517 – Prospectus Exemption for Start-Up Businesses
Blanket Order 45-521 Start-up Crowdfunding Registration and Prospectus Exemptions
Ontario Instrument 45–506 Start-Up Crowdfunding
Another area of confusion is not being addressed is the exemption rule for the distributions to investors outside Canada. Currently we have
BCI 72-503 Distribution of securities outside British Columbia
BCI 72-501 Distribution of securities outside Alberta
Distributions to purchasers outside of local jurisdiction (BC, AB, NB)
OSC Rule 72-503 Distributions outside Canada
SKFSC Rule 72-901 Trades to Purchasers Outside of Saskatchewan
Other Exempt Type
One issuer could have filed the foreign distribution under “Distributions to purchasers outside of local jurisdiction (BC, AB, NB)” for one filing and in the next filing, it could be under “Other Exempt Type”.
A simple and harmonized rule for foreign investor distribution should help issuers in filing and regulators in monitoring.
photo credit: CSA
News Release
Canadian securities regulators adopt new nationally harmonized start-up crowdfunding rules
VANCOUVER, BC, June 23, 2021 /CNW/ – The Canadian Securities Administrators (CSA) today adopted harmonized rules for securities crowdfunding.
National Instrument 45-110 Start-up Crowdfunding Registration and Prospectus Exemptions introduces a single, uniform set of rules that replaces and enhances the requirements currently in effect in Alberta, British Columbia, Manitoba, New Brunswick, Nova Scotia, Ontario, Québec and Saskatchewan.
“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.
Following stakeholder consultation, the CSA made targeted amendments to improve the effectiveness of start-up crowdfunding as a capital-raising tool, including:
Increasing the maximum total amount that an issuer can raise under the crowdfunding prospectus exemption in a 12-month period to $1.5 million (from the current $500,000).
Increasing the maximum investment a purchaser can make in an offering to $2,500 (from the current $1,500), with a higher limit of $10,000 if a registered dealer advises that the investment is suitable for the purchaser.
Removing barriers preventing federal and provincial co-operatives or associations from using the start-up crowdfunding prospectus exemption.
Requiring funding portals relying on the registration exemption to certify on a semi-annual basis that they have sufficient financial resources to continue operations for the following six months.
Requiring issuers to have operations other than the acquisition of an unspecified business before using the start-up crowdfunding prospectus exemption.
National Instrument 45-110 Start-up Crowdfunding Registration and Prospectus Exemptions can be found on the websites of the above noted CSA members.
Since 2015, about 110 distributions of securities have taken place under the existing start-up crowdfunding prospectus exemptions, with an average investment of $576 from each investor.
The CSA, the council of the securities regulators of Canada’s provinces and territories, co-ordinates and harmonizes regulation for the Canadian capital markets.
For investor inquiries, please refer to your respective securities regulator. You can contact them here.
For inquiries from market participants (issuers and registrants, or their representatives), please refer to the list of subject matter experts at the end of the Notice.
SOURCE Canadian Securities Administrators
For further information: For media inquiries, please contact: Pascale Bijoux, Canadian Securities Administrators, media@acvm-csa.ca; Elise Palmer, British Columbia Securities Commission, mediarelations@bcsc.bc.ca