On December 6, 2013, Saskatchewan became the first Canadian jurisdiction to implement Rules that provide a prospectus exemption for equity crowdfunding. The Rules allow Saskatchewan start-ups and small businesses to raise capital through equity crowdfunding by selling their securities to the general public without a prospectus.
The Saskatchewan exemption is available subject to certain conditions, including the following:
- Both the business and the investor must have an address in Saskatchewan;
- The business must make available to investors a very simple offering document, in prescribed form;
- The investment must be intermediated by an online funding portal that has filed with the Saskatchewan regulator a simple acknowledgment form;
- An offering may not exceed $150,000 or last longer than six months;
- The business may make no more than two crowdfunding offerings during a calendar year;
- No person may invest more than $1,500 in a crowdfunding offering; and
- The business cannot be a reporting issuer or an investment fund and cannot offer derivatives or charge investors commissions.
Saskatchewan’s Rules arrive amidst a heightened focus on equity crowdfunding both in the U.S. and in Ontario. The U.S. Securities and Exchange Commission released its own proposed equity crowdfunding rules for comment in October and, as we discussed in a previous blog post, the Ontario Securities Commission is also conducting a broad review of the “exempt market” in Ontario with a view to introducing new prospectus exemptions, including a crowdfunding exemption.
The Ontario Securities Commission intends to publish for comment in the first quarter of 2014 an Ontario crowdfunding exemption and a registration framework for online funding portals. It is expected that Ontario’s crowdfunding rules will permit larger crowdfunding investments and offerings than Saskatchewan’s Rules.