Securities regulatory authorities in Manitoba, Ontario, Québec, New Brunswick and Nova Scotia have all published, in final form, Multilateral Instrument 45-108 Crowdfunding. This instrument introduces a crowdfunding prospectus exemption for issuers, and a registration framework for funding portals.
The MI 45-108 crowdfunding regime will offer businesses greater access to capital from a large number of investors online, through a funding portal operated by a registered dealer. “This new crowdfunding regime is another way to facilitate capital raising for start-ups, and for small and medium-sized enterprises while also protecting the interests of investors,” says Louis Morisset, CSA chair and president, and CEO of the Autorité des Marchés Financiers.
Among the measures adopted to protect investors, issuers will be required to distribute their securities through a registered funding portal. These funding portals will fulfill gatekeeper functions that include: reviewing the disclosures of issuers; and obtaining background checks on issuers and their directors, executive officers and promoters.
In addition, investment limits based on the investor’s income and financial resources have been adopted as a means of reducing people’s exposure to risky investments. When using the crowdfunding prospectus exemption, issuers will:
- only be able to offer non-complex securities;
- be prohibited from advertising; and
- will be subject to a standard of liability on the information they present to investors.
The MI 45-108 crowdfunding regime will coexist, and is viewed as complementary, to previous start-up crowdfunding exemptions that have been adopted.
Provided all necessary Ministerial approvals are obtained, MI 45-108 will come into force in participating jurisdictions on January 25, 2016. For now, the Financial and Consumer Affairs Authority of Saskatchewan (FCAA) will be republishing MI 45-108 for a 60-day comment period.