Five different Canadian provinces joined together this past week to publish the final form of Multilateral Instrument 45-108 Crowdfunding which is the prospectus exemption and registration framework for crowdfunding portals. As expected, Ontario, Manitoba, Quebec, Nova Scotia and New Brunswick will join together to allow small businesses “greater access to capital from a large number of investors online through a funding portal operated by a registered dealer”.
CSA Chair / President & CEO of Autorité des marchés financiers, Louise Morisset, stated;
“This new crowdfunding regime is another way to facilitate capital raising for start-ups and small and medium-sized enterprises while protecting the interests of investors.”
Issuers will be required to distribute their securities through a registered funding portal. These funding portals will fulfill certain gatekeeper functions that include reviewing the issuer’s disclosure and obtaining background checks on the issuer and its directors, executive officers and promoters. Investment limits based on the investor’s income and financial resources have been adopted to reduce exposure to a risky investment. When using the crowdfunding prospectus exemption, issuers will only be able to offer non-complex securities, will be prohibited from advertising and will be subject to a standard of liability on the information they present to investors.
Issuing companies may raise up to $1.5 million in a 12 month period. Non-accredited investors may invest up to $2500 per investment with an annual limit of $10,000. Accredited investors may invest up to $25,000 except for Ontario which has a $50,000 limit. All investors must sign a risk acknowledgement prior to participating.
The MI 45-108 crowdfunding regime will coexist and is viewed to be complementary with the start-up crowdfunding exemptions by those jurisdictions that adopted them on May 14, 2015 in Manitoba, Saskatchewan, Québec, New Brunswick and Nova Scotia.
The exemption will come into force in the participating jurisdictions on January 25, 2016.
The Financial and Consumer Affairs Authority of Saskatchewan (FCAA) will be republishing MI 45-108 for a 60 day comment period.
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