Prescribed form of offering document - Rather than have
issuers or portals prepare their own type of offering document
with different types of disclosure, the FCAA has proposed a
standardized disclosure form which will provide consistency and
minimum disclosure requirements for all issuers.
No financial statements required - No financial statements
are required to be provided to investors since arguably they are
irrelevant for a start-up and costly to prepare.
Requirement to explain how the issuer will report to investor -
The offering document includes a requirement for an issuer to
explain how it will report to its investors. Although there is no
requirement to report, at least investors will understand the issuers
reporting commitments and obligations up-front.
Start-up exemption – The Proposed Exemption is truly a
way for start-ups and entrepreneurs to raise capital since public
companies and investment funds cannot use the exemption.
Some of the disadvantages of the Proposed
Portal is unregulated - The funding portal is
unregulated since it will be exempt from registering as a dealer or
advisor with the FCAA. This poses a serious regulatory concern and
potentially exposes investors to fraud in small but not insignificant
amounts. Even if the losses to individuals investors are limited to
a small amount, when multiplied by a large number of offerings
and a large number of issuers, this could still offer a significant
opportunity to fraudsters.
Regulatory review may provide investors with false comfort –
An issuer’s offering document must be pre-filed with the FCAA
which also does background checks on certain key individuals
associated with an issuer. This is helpful but may inadvertently
suggest to investors that the FCAA has passed on the merits of the
Registration: The portal is not required to be registered with the FCAA as a dealer provided if complies
with certain filings, conditions and that it provides no advice to investors.
Compensation: The portal can receive a commission and earn a fee.
Filings: Portal – the portal must file Form GO45-925F5 Portal Information within 30 days of
facilitating Crowdfunded trades.
Key people – each promoter, director, officer and control person of the portal must file
a Form GO45-925F6 Portal Individual Information Form within 30 days of facilitating
Crowdfunded trades. The FCAA will be doing background checks on individuals involved
with the portal.
Conditions: In order to rely on the Proposed Exemption, the portal must ensure that:
1. It makes the Important Risk Warnings document and the offering document separately
available to investors electronically online.
2. It does not allow the investment until the investor confirms online that they have read
and understood the offering document and the Important Risk Warnings.
3. It does not release any funds until the minimum offering amount has been raised and
until that time all funds received for the offering are held in trust for investors.
4. When the offering is closed, the portal provides the issuer with the details of the
investor (e.g., name address, e-mail etc.) within 15 days of the closing of the offering.
5. Issuers and investors have an address in Saskatchewan.