The Canadian Securities Administrators (CSA) has proposed a policy to harmonize the self-certified investor prospectus exemption across all Canadian provinces.
In Canada, securities regulation happens only at the provincial level. Obviously, this creates more friction for issuers and investors, but the political will to enable a truly Canada-wide approach simply does not exist. But the CSA is proposing a change that makes some sense, as the self-certified investor regulation could improve the environment for private offerings and interested investors.
First reported by the National Crowdfunding and Fintech Association (NCFA), which describes the potential change as significant, as it may “lower the cost of fundraising and increase the number of investors able to participate” for startups and small businesses. This is a good policy, and Canada needs some entrepreneurial economic growth. The NCFA criticizes policymakers for the long-standing “fragmented securities rules that make capital raising inefficient.”
Canada has a lot going for it, as the population is well-educated and risk-taking. They simply need a government that understands capital formation and the importance of an innovation-driven economy.
The proposal, which will include a 90-day comment period, is available here.
The document states:
“The provincial governments of the Participating Jurisdictions are actively working to strengthen, adapt, and diversify their provincial economies. In our role as securities regulators, we support these initiatives by ensuring that securities legislation both protects investors and fosters a dynamic capital market that allows businesses to access the capital they need and provides investment opportunities to investors. Our aim is to strike the right balance by protecting investors without imposing unnecessary burdens on growing businesses. To achieve this, we are seeking comment on the Proposed Instrument, the Proposed Companion Policy, the Proposed Amendments, and the Proposed Changes. We anticipate that investors who qualify as accredited investors under the prospectus exemption in section 2.3 of NI 45-106 (Accredited Investor Exemption) will continue to invest under that exemption, and this Proposed Instrument will be used by qualified investors who do not meet the criteria in the Accredited Investor Exemption. To mitigate the risk of loss for an investor under the Proposed Instrument who meets the criteria for a self-certified investor (Self-Certified Investor) we have proposed a maximum annual investment limit of $50,000 per investor.
The CSA recognizes the growing demand for private securities. Creating a more streamlined process for investors is good policy but much more could be done.