The EMDA has been looking for some time at the concept of selling
securities over the internet under existing prospectus exemptions.
The passage of the Crowdfunding framework in the United
States under the JOBS Act increased interest in selling securities
over the internet albeit to the public. The EMDA became more
involved in taking a leadership role in promoting education and
information about equity-based Crowdfunding since it represents
a new way to raise capital in Canada and introduces a possible new
registrant to the exempt market, the ‘funding portal’. Our interest
has been well timed as the Ontario Securities Commission (OSC)
is now also focused on examining new capital raising prospectus
exemptions, including Crowdfunding.
There is a wide funding gap in Ontario between the
private issuer exemption and other prospectus exemptions
under Ontario securities law, such as the accredited
investor (AI) and minimum amount prospectus exemptions.
For example, recent OSC statistics indicate that the number
of individuals qualifying as AIs under the current income and
asset thresholds is less than 4% of the Ontario and Canadian
populations. Ontario residents represent 41% to 44.8% of all
potential AIs in Canada.
This means that only a small number of wealthy individuals
are presently investing in the exempt market where capital
is largely raised under the AI exemption. More than 96%
of Ontarians are being left out. In 2011, the total amount of
capital raised in Ontario through exempt distributions was
approximately $86.5 billion of which approximately $72.8 billion
was raised under the AI exemption.
In the midst of what some call a crisis in capital raising to
finance businesses and create jobs, Ontario needs to embrace
new prospectus exemptions to make it easier to raise capital
from a larger number of investors. The EMDA has pushed for the
Offering Memorandum in Ontario for some time and that effort is
now paying off. Another key opportunity could be Crowdfunding
which attempts to bridge the funding gap by selling securities
over the internet to the public. Crowdfunding represents a new
part of the ‘ecosystem’ of capital raising and should be seriously
considered along with the other new capital raising prospectus
exemptions. The EMDA was pleased to see all of these options
on the table in the OSC concept proposal published on
December 14, 2013 titled OSC Staff Consultation Paper 45-710
– Considerations for New Capital Raising Prospectus Exemptions
(the Consultation Paper).
The EMDA has lead various initiatives to advance
the public policy debate and bring forward the necessary
discussion, education and information about Crowdfunding.
Presently, the EMDA is neither advocating for or against
Crowdfunding as we continue to evaluate its affect on the
exempt market and EMDs, but we are seriously considering,
and helping shape, this potential new prospectus exemption.
The EMDA will be submitting a comment letter to the OSC in relation
to the Consultation Paper and we ask for your input – please email
us your thoughts and comments at email@example.com.
EMDA out in front of the CROWDFUNDING WAVE
EMDA Chairman makes presentations at recent CROWDFUNDING CONFERENCES
By Brian Koscak, EMDA Chairman and Partner, Cassels Brock & Blackwell LLP