The Ontario Securities Commission (“OSC”) recently released OSC Notice 45-712 – Progress Report on Review of Prospectus Exemptions to Facilitate Capital Raising (the “Progress Report”), which identifies four capital raising prospectus exemptions the OSC will consider with respect to further work: (i) crowdfunding; (ii) friends, family and business associates; (iii) offering memorandum, and (iv) exemption based on a reporting issuer’s continuous disclosure and existing security holder base.
In the Progress Report, the OSC identifies significant stakeholder support for the crowdfunding exemption and acknowledges the emergence of crowdfunding as a new way for start-ups and small businesses to raise capital. Building on the crowdfunding concept idea introduced in its December 2012 consultation paper, the OSC intends to develop a regulatory framework for funding portals and to refine issuer restrictions and investor protection measures. The OSC identifies, in the Progress Report, certain measures it considers appropriate for the exemption: limits of $2,500 on a single investment and $10,000 in total in a calendar year, mandatory risk acknowledgement and a cooling off period. Other measures, such as limits on offerings and the disclosure at the point of sale, will be revisited by the OSC.
The Progress Report confirms the OSC’s interest in moving forward with the crowdfunding exemption and emphasizes the important balance that must be struck, when developing the regulatory framework, between appropriate investor protection and regulations that are not excessively burdensome as to detract from the viability of crowdfunding.