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 | Wednesday June 19, 2019

Bad Faith and Costs Consequences

Authored by: Terrance G. Sheppard Posted in: Family Law

Litigants are not rewarded for bad behaviour. In a recent decision out of the Ontario Superior Court of Justice, a father was ordered to pay $420,000 in costs to his former spouse, after losing the case for custody of their young daughter.

Read full article
Blog Post | Thursday June 13, 2019

Canadian Official Marks: Qu’est-ce que c’est?

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

The Trademarks Act (the “Act”) contains a unique provision that allows “public authorities” to by-pass the normal trademark registration application process and to protect their “official marks” indefinitely. There is no similar provision in any other country’s trademark protection regime.

Read full article
Blog Post | Friday June 7, 2019

Accident & Personal Injury Law Team - request a free consultation

Posted in: Personal Injury

We are an experienced, passionate and dedicated team of accident & personal injury lawyers.

Read full article
Blog Post | Wednesday May 29, 2019

Family Law Resources: Wise Words from a Family Court Judge

Authored by: Mary H. Brown Posted in: Family Law

Although now 10 years old, Tug of War: A Judge’s Verdict on Separation, Custody Battles, and the Bitter Realities of Family Court, by Justice Harvey Brownstone of the Ontario Court of Justice, remains an insightful and powerful read on the uses and misuses of family court.

Read full article