Regulators struggle with crowdfunding model

Ontario looked upon as key to setting paceCanada Flag

When the U.S. Jumpstart Our Business Startups Act was passed last year, it included a “crowdfunding exemption” that opened the door to using social media and other Internet tools to raise capital. And while other jurisdictions, such as Australia, Britain and the Netherlands, have similar legislation, Canada remains mired in a regulatory logjam that threatens its competitive edge, especially when it comes to startups and SME’s.

Information technology is fast and fluid while regulators tend to be slow and deliberate, which is why crowdfunding is still basically illegal in Canada.

“Using our existing regulatory framework to deal with something like equity crowdfunding is like trying to jam a round peg into a square hole,” says Andrea Johnson, a partner with Fraser Milner Casgrain. “These laws were written before the Internet, before social media and before people became sophisticated in how they approach the content they see online.”

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