“CSA staff have heard from market participants that a harmonized regulatory framework tailored for securities crowdfunding available across Canada would foster the use of securities crowdfunding as an alternative for start-ups and early stage issuers to raise capital,” the CSA said in a notice.
Since 2015, there have been approximately 110 distributions made under the existing crowdfunding exemptions, with an average investment of $576 per investor, the CSA reported.
The new rules, which take effect Sept. 12, aim to make crowdfunding a more useful fundraising option.
“These rules expand the ability of small businesses and start-ups to use securities crowdfunding to gain access to capital,” said Louis Morisset, chair of the CSA and president and CEO of the Autorité des marchés financiers (AMF) in a release.
In addition to fully harmonizing the rules, the CSA has made a number of changes to the existing rules to make crowdfunding more effective, such as increasing the maximum amount an issuer can raise in a 12-month period to $1.5 million from $500,000, and raising the maximum investment to $2,500 from $1,500.
The new rules also add some investor protections. For instance, they require funding portals to certify semi-annually that they have enough money to operate for at least the next six months, and they require issuers to have operations — not just plans to acquire an unspecified business. Issuers will also face statutory liability similar to the offering memorandum exemption.
Read More:CSA takes national approach to crowdfunding | Advisor’s Edge