New OSC Regulations Regarding Crowdfunding in Ontario
The Ontario Securities Commission’s (OSC’s) changes to the regulatory landscape will make raising funds through crowdfunding platforms a little easier in Ontario for a business. Under the new OSC regulations regarding crowdfunding, businesses will be allowed to offer equity ownership through crowdfunding platforms. The changes are scheduled to be implemented in late January 2016 when the OSC’s Multilateral Instrument 45-108 – Crowdfunding takes effect.
The new rules require crowdfunding portals to register with the OSC and will impose due diligence obligations on the portal regarding any investments it chooses to host. These include the requirement that the crowdfunding portal review the information in the crowdfunding offering document and other supporting materials for accuracy and completeness and to confirm that these items do not include any misleading statements.
The new regulations will also cap the amount that any individual may invest, For the majority of individuals, the maximum investment amount will $2,500 per investment and with a yearly cap of $10,000 in a calendar year. The restrictions for accredited investors differ as they will be able to invest $25,000 per investment and $50,000 per calendar year. Accredited investors are investors who meet certain requirements as set out by the OSC, the OSC’s requirements for who qualifies as an accredited investor can be found here.
It is important to note that under the new start-up crowdfunding exemptions, both the businesses that are seeking to raise capital, and the crowdfunding platforms themselves, are required to meet a number of conditions and obligations in order to be in compliance with OSC regulations. Furthermore, there may be jurisdictional matters that any business or platform may need to consider. As these issues can be complex, it is advisable that organizations wishing to engage in the method of raising capital first speak to a lawyer who has expertise in this area.
This article was written by Myron Mallia-Dare, a business lawyer based in Toronto, Canada. The information in this article is not intended to be legal advice and is of a general nature. Consult a lawyer for advice for any specific situation.