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Canadian securities regulators raise crowdfunding cap to expand access to capital for start-ups

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Maria Gill
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Canadian Securities Officials (CSA) have adopted a set of new, nationally harmonized rules for equity crowdfunding.

CSA, the Council of Provincial and Territory Securities Regulators of Canada, coordinates and coordinates the regulation of Canadian capital markets. Through crowdfunding and introductory release waivers, CSA has increased the amount issuers are allowed to raise annually from $500,000 to $1.5 million. These new rules will go into effect on September 21.

These rules expand the ability of small businesses and startups to use crowdfunding through equity to access capital. “
– Louis Morissette, President of ASC

The new requirements, designed to “improve the effectiveness of crowdfunding for start-ups as a tool for raising capital,” are designed to replace or improve crowdfunding rules currently in effect in Ontario, Quebec, Canada. British Columbia, Alberta, Manitoba, New Brunswick, Nova Scotia and Saskatchewan.

“These rules expand the ability of small businesses and startups to use equity crowdfunding to access capital,” said Louis Morissette, CSA president and CEO, Autorité des marchés.

Peter Paul van Hoken, founder and CEO of Toronto-based equity crowdfunding platform FrontFonder, called the move “a watershed moment for Canadian investment crowdfunding.”

“We’ve seen the tremendous value and impact of coordinated crowdfunding rules in the US and UK, and so we’re really excited to work with Canadian companies and investors to help create the same kind of environment here,” said Van Houken. . .

Related: FrontFundr seeks to help businesses go public with new partnership

According to FrontFundr, although equity crowdfunding has been in Canada since 2015, “to date it has been largely organized at the provincial level and lacks the consistent, consistent approach at the national level that has helped this funding model thrive elsewhere.” ”

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The new rules also increase the maximum investment a buyer can make from $2,500 to $1,500, and introduce an upper limit of $10,000 if a registered dealer notifies the buyer that the investment is appropriate. Additionally, the rules remove barriers that prevent federal and provincial cooperatives or associations from using the prospectus exemption to crowdfund startups.

Related: OSC introduces temporary order to facilitate seed equity crowdfunding

The changes require funding portals that rely on exemption from registration to demonstrate twice a year that they have sufficient financial resources to continue their operations for the next six months. It also requires issuers to conduct transactions other than the acquisition of an unspecified business before using the crowdfunding prospectus exemption.

The CSA has reported that 110 securities distributions have taken place under current crowdfunding prospectus exemptions since 2015. These distributions have resulted in an average investment of $576 per investor.

Featured image from Pixabay

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