Tuesday June 3, 2014

Open for Comment: You Can Help Determine how Crowdfunding will be Regulated

Authored by: Ted R. Sawa Posted in: Business Law

Following the lead of Saskatchewan, the security regulators of Nova Scotia, Quebec, Saskatchewan, New Brunswick and Manitoba are seeking feedback on proposed regulations with respect to raising money and issuing securities via the internet (‘Proposed Regulations’). Ontario and British Columbia have also proposed similar regulations. These Proposed Regulations are only relevant if shares or other securities are issued in exchange for an investment. Therefore, donation-based crowdfunding, where the donor may receive public recognition or a product (such as a lifetime membership or discount) will not be directly affected by these proposals.

If a company raises capital and issues securities via the internet, security regulators must ensure that  members of the general public are protected from unscrupulous fundraising. In general, a company must file a prospectus, or a significant disclosure document, before issuing securities to the public unless the company can rely on one of several specific exemptions from this requirement.

The Proposed Regulations create two new exemptions for companies issuing securities via the internet: the “Start-Up Exemption” for companies in very early stages of development and the “Crowdfunding Exemption” for more established companies. These exemptions regulate:

  1. the company raising the capital (the “Issuer”);
  2. the member of the general public making the investment (the “Investor”);  and
  3. the intermediary that facilitates this investment (the “Portal”).

 The basic overview of the Proposed Crowdfunding Regulations  is set out below. 


Start-Up Exemption

  1. Head office must be in Nova Scotia, Quebec, Saskatchewan, New Brunswick or Manitoba;
  2. Can raise up to $150,000 per offering and can make up to two offerings per year;
  3. Must deliver offering materials to securities regulator and can only make offering materials available to potential investors via Portal.
  1. Can invest up to $1,500 in a single investment;
  2. Must read and understand risk warning.
  1. Head office must be in Nova Scotia, Quebec, Saskatchewan, New Brunswick or Manitoba;
  2. Does not have to be registered but must deliver a Portal Information Form;
  3. Must ensure the offering document of the Issuer is available online and that the Investor confirms that they have read and understood the offering document and the risk warning;
  4. Cannot provide investment advice or be related to the Issuer.

Crowdfunding Exemption

  1. Can raise up to $1.5 million per year;
  2. Must make offering materials available on Portal;
  3. Investors can be directed to Portal’s website by paper notice or through social media but marketing materials must be limited to offering document, documents described in offering document and a term sheet or other summary (including a video);
  4. Must provide point of sale disclosure and ongoing disclosure including annual financial statements.
  1. Can invest up to $2,500 in a single investment and a total of $10,000 per year;
  2. Must sign risk acknowledgement form.
  1. Must be registered as a restricted dealer;
  2. Must provide background checks on Issuer, directors, officers, promoters and control persons;
  3. Must understand the security being offered and confirm the information provided by the Issuer;
  4. Must provide investor education materials in plain language;
  5. Must deny access to an issuer if it believes the issuer or its offering is fraudulent;
  6. Must ensure the offering document of the issuer is available online and that the investor confirms that they have read and understood the offering document and the risk warning;
  7. Cannot provide investment advice and cannot hold more than 10% of the securities of the Issuer.

Comments can be submitted on or before June 18, 2014 to Anne-Marie Beaudoin, Corporate Secretary, Autorité des marches financiers at consultation-en-cours@lautorite.qc.ca.

For further information about sources of business financing and the regulation of securities in Nova Scotia, connect with a member of our team. To contact a member of our Business Law team call us at 902-469-9500 or 1-866-339-3400.

Share This Post:

Ask a question about this post.

Any Questions

Recent Blog Posts

Blog Post | Thursday November 7, 2019

Trademark Basics: What is a Trademark?

Authored by: Marc J. Belliveau Posted in: Intellectual Property

Canadian trademark practice is evolving every year due to technological advancements in brand marketing and changes in the law itself, whether through legislative amendments to the Trademarks Act or as a result of new judicial interpretations.

Read full article
Blog Post | Tuesday October 8, 2019

Supreme Court finds Crown owns Copyright in Land Surveys

Authored by: Marc J. Belliveau Posted in: Intellectual Property

It is not often that our Supreme Court of Canada (“SCC”) decides a copyright case. So, it’s always exciting to read their latest thoughts on the interpretation of the Copyright Act (“Act”).

Read full article
Blog Post | Tuesday September 17, 2019

What are Statutory Damages for Copyright Infringement?

Authored by: Marc J. Belliveau Posted in: Intellectual Property

When you sue someone for copying your original work of art, music, drama or fiction without your permission, it’s often difficult, time consuming and very costly to calculate and prove the full amount of your financial losses.

Read full article
Blog Post | Wednesday August 28, 2019

What’s the Buzz in Music Plagiarism Lawsuits?

Authored by: Marc J. Belliveau Posted in: Intellectual Property

During the last century, composers, musicians and their copyright lawyers held a traditional belief and legal understanding that copyright infringement lawsuits related only to stolen lyrics and copied melodies, but not for more abstract compositional elements.

Read full article