In a document published recently by the British Columbia Securities Commission (BCSC) in Canada, the provincial regulators appear to address the issue of crowdfunding and its legality in the province. Unlike the United States where the federal regulators have jurisdiction over regulating crowdfunding nationwide, the Canadian provinces are regulated specifically by each provincial securities authority.
In what appears to be a very liberal allowance for equity crowdfunding the financial authorities state in the public document:
“Crowdfunding” is a term used to describe raising small amounts of money from many people, usually over the internet. The concept has been used by charities and by some companies who offer product pre-sales.
The US is considering adopting a new “crowdfunding” exemption that would allow companies to sell securities to anyone over the internet through either a registered broker-deal or a registered funding portal. The SEC still needs to develop rules to support the exemption.
The BCSC has considered the US crowdfunding exemption and various initiatives undertaken by other Canadian regulators.
In BC, we have a number of exemptions that allow small businesses to raise capital from their family, friends and communities – in short, to do crowdfunding. These include the family, friends and business associates exemption and the OM exemption. The OM exemption allows companies to sell securities to anyone in B.C. without a prospectus, regardless of whether the purchaser meets any financial tests or has a connection with the directors and management of the company. There are no limits on how much a purchaser can invest and no limits on how much funding the company can raise. There are also no requirements that the trades be made through a funding portal.
The British Columbia Securities Commission is the independent provincial government agency responsible for regulating securities trading in BC. Their mission is to promote a securities market which is fair and instills public confidence AND fosters a dynamic and competitive industry that provides investment opportunity and access to capital. They not only want to inspire confidence but also innovation. The BCSC has nine commissioners and is currently chaired by Brenda M. Leong who was appointed Chair and CEO in 2009. The BCSC previously held meetings in 2012 discussing the innovation of crowdfunding.
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