Online equity crowdfunding kicked off in a handful of provinces on Monday, allowing fledgling companies to begin raising funds from retail investors through registered portals.
The new rules introducing a new crowdfunding prospectus exemption and a registration regime for funding portals are now in effect in Ontario, Quebec, Manitoba, New Brunswick and Nova Scotia. The new regime allows small businesses to raise small amounts of capital from a large number of retail investors.
Companies are required to distribute their securities through registered funding portals, which have to meet various gatekeeper responsibilities, including reviewing the issuers' disclosure and carrying out background checks on executives and directors. Investors are subject to investment limits under the rules, designed to limit their risk of loss.
Quebec, Manitoba, New Brunswick and Nova Scotia already have a different "start-up" crowdfunding exemption. The new exemption is intended to be complementary to the start-up exemptions in those jurisdictions.
The four provinces issued a notice on Monday indicating that the start-up crowdfunding exemption orders have been amended or replaced "to allow a funding portal registered as a restricted dealer … to facilitate the distribution of securities under the start-up crowdfunding prospectus exemption."
Saskatchewan expects to implement a new crowdfunding prospectus exemption and a registration regime for funding portals at a later date.
British Columbia has adopted the start-up exemption, but is not implementing the other crowdfunding exemption.