Regulators OK New Crowdfunding Rules for Firms in Five Provinces

Crowdfunding rules adopted in early 2016 by Manitoba, Ontario, Quebec, New Brunswick, and Nova Scotia.
The Globe and Mail’s Janet McFarland reports that the recently completed crowdfunding rules will allow companies to raise up to $1.5-million in a 12 month period from investors via internet sites. New rules from this legislation will be adopted in early 2016 by Manitoba, Ontario, Quebec, New Brunswick, and Nova Scotia. Saskatchewan plans to publish the same rules for public comment while other provinces continue with their own crowdfunding standards, rules, and investment thresholds.

McFarland goes on to explain the importance of this legislation as it provides small startup companies more options and bigger sources of initial financing by allowing equity to be issued. She quotes Howard Wetston, chair of the Ontario Securities Commission, as he states that the younger generation is comfortable investing online and that “our regulatory environment needs to recognise how society is evolving.”

However, due to the issue of possible fraud via crowdfunding scams, the new rules include protections such as per annum and per individual investment maximums as well as requiring investors to go through portal dealer websites that are registered with securities regulators. McFarland goes on to explain that the dealer websites will be required to review disclosures from companies seeking funds and do background checks on key company employees as well. For the investors themselves, wealthier accredited individuals will be able to fund up to $25,000 per investment while non-accredited individuals will be limited to $2,500 per investment. Ontario specifically plans to impose an annual limit of $50,000 for accredited and $10,000 for non-accredited investors. All investors from the provinces adopting the legislation will be required to sign a risk-acknowledgement form and companies will provide investors annual financial statements and a yearly notice about how the money raised was used.

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McFarland concludes the article with a quote from Mr. Wetston stating that they have “put in place enough investor protection to assure ourselves this is not a runaway train.”?