CSA regulators adopt crowdfunding prospectus exemption and accompanying funding portal registration exemption

May 15, 2015

On May 14, 2015, the securities regulators of British Columbia, Saskatchewan, Manitoba, Quebec, New Brunswick and Nova Scotia announced that they have implemented, or expect to implement, a crowdfunding prospectus and registration exemption intended to facilitate the ability of Canadian start-ups to raise capital. 

The prospectus exemption would apply to issuers who meet certain conditions.  Notably, issuers may only raise up to an aggregate of $250,000 per distribution with a maximum of two such distributions per issuer annually.  Furthermore, investors are only permitted to invest $1,500 per distribution. 

A central condition to the exemption is that securities distributed pursuant to the crowdfunding exemption must be distributed through a designated online funding portal.  Funding portals are subject to an accompanying registration exemption provided they meet certain conditions set out in the same adopting blanket order.  In particular, the funding portal’s head office must be located in Canada and a majority of its directors must be Canadian residents.  Notably, funding portals are not permitted to collect fees or commissions from investors.

The crowdfunding exemption was enacted through local orders in the above-noted provinces, which expire on May 13, 2020.  For further information, please see our prior posts, Multilateral CSA Notice 45-316 and the blanket orders adopted in each participating jurisdiction.

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