Category Archives: Legal Issues and Regulation

Competition Bureau suggests Canadian FinTech sector’s slow growth due to regulation, consumer complacency

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Betakit | | May 2, 2017

A new summary from the Competition Bureau of Canada reveals that FinTech leaders and financial regulators believe that Canada’s financial services sector is not reaching its full potential.

The summary, published on the Bureau’s FinTech portal, follows a workshop hosted by the Bureau in late February. The workshop invited 130 Canadian and international FinTech stakeholders, including regulators and startup founders, to discuss how Canada can improve its competitive environment and foster innovation in the FinTech sector. Panel participants included Wealthsimple CEO Mike Katchen, OSC LaunchPad CEO Pat Chaukos, and Thinking Capital CEO Jeff Mitelman.

The summary notes key reasons why Canadian FinTech leaders believe that the sector is not realizing its potential in Canada.

While the workshop’s participants agree that FinTech has the potential to scale and deliver benefits to Canadian and international consumers, it focused more on the key reasons why FinTech leaders believe that Canada’s FinTech sector is not reaching its potential.

Among the challenges FinTech firms face today was a lack of trust in new alternatives to the big banks, and consumer complacency. Participants said consumer complacency and inertia contribute to the slow FinTech uptake in Canada.

Participants also said that Canadians being less savvy and less digitally mature, and the fact that some businesses don’t feel the need to integrate digital financial practices into their companies, also contributes to slower FinTech uptake.

See:  Competition Bureau launches FinTech market study

The Bureau summary revealed that another reason FinTech is not realizing its potential was a lack of access to consumer data, because it prevents FinTech firms from better understanding and addressing the needs of customers. Participants at the Bureau’s workshop also raised the issue of limited access to banking infrastructure to provide consumers with “frictionless services” and “improve interoperability between services.”

To tackle these challenge, the summary notes that keynote speaker Dr. Robert Atkinson, president and founder of the Information Technology and Innovation Foundation, suggested that FinTech startups need to interact with the legacy systems of incumbents, even though they may not want that interaction.

Besides consumer complacency and access to data, participants mentioned attracting talent and obtaining capital beyond the seed stage affects the ability of FinTechs to bring their products to sufficient scale. They also suggested that since regulation can play a role in winning consumer confidence for FinTechs, there is a need for more appropriate and balanced regulation.

Currently, Canada’s regulatory framework for financial services is complex and fragmented, and regulations often vary across and within jurisdictions, making it challenging for FinTech firms to monitor, identify, and address regulatory risks, as well as respond to market demands.

“We need more choice and innovation in financial services in Canada. FinTech is an important part of the solution and, frankly, we’re playing catch up.” – Andrew Graham, CEO of Borrowell

“There was also acknowledgment that the current regulatory framework is entity‑based, prescriptive, and not written to take into account changing technology. For example, FinTech innovations do not fit neatly with securities requirements designed around face‑to-face interactions,” the summary reads. “While the objectives may be sound, prescriptive regulation can be difficult to implement in a digital space. If too rigid, such regulation reduces businesses’ ability to be nimble and responsive to market demand and reduces regulators’ flexibility to adapt to the changing marketplace.”

When it comes to regulations, some participants emphasized that FinTech firms cannot grow when regulatory bodies don’t embrace change, or when incumbents are reluctant to agree to changes in current standards.

Continue to the full article --> here

The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with both social and investment crowdfunding stakeholders across the country. NCFA Canada provides education, research, leadership, support, and networking opportunities to over 1500+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding industry in Canada. Learn more at www.ncfacanada.org.

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Robin Ford, Former BC Securities Commission Executive Commissioner, Joins National Crowdfunding Association of Canada’s Advisory Group

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NCFA Canada | Craig Asano | May 16, 2017

Robin Ford, Advisor, Governance and Regulation

VANCOUVER, MAY 16, 2017 – The National Crowdfunding Association of Canada (NCFA) today announced that Robin Ford, Former British Columbia Securities Commission (BCSC) Executive Commissioner, has joined the Association as Advisor, Governance and Regulation.

After 25 years as a public-sector lawyer and regulator, Robin is now consulting in the areas of financial services regulation, governance, and compliance.  She has extensive experience working with and advising regulators and the regulated, leading projects and teams, and facilitating organizational change.

Robin has served as Executive Commissioner at the BCSC, Chief Counsel, Insurance at the UK Financial Services Authority, and legal adviser to the UK and British Columbia Governments.  She played an important role in an ambitious program of regulatory reform and in integrating 9 regulators into the newly formed UK FSA, as it became a more analytically disciplined, risk-based, and outcomes-focused regulator.

“Having such a highly experienced and capable senior ex-financial services regulator join the NCFA Advisory Group speaks volumes about how much the regulated crowdfunding sector in Canada has developed and its potential to raise, lend, or share capital and facilitate investment. We’re very pleased to have Robin join the community to help bridge the gap between regulators and the alternative markets and to support regulations that are both suitable for online financial marketplaces and globally competitive.”  Craig Asano, Executive Director, NCFA Canada

“I was delighted to be asked to join the Advisory Group of the NCFA, which has already achieved so much to facilitate developments in the crowdfunding sector. I look forward to contributing on regulatory and governance issues." Robin Ford, Former BCSC Executive Commissioner

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About National Crowdfunding Association of Canada

The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with both social and investment crowdfunding stakeholders across the country. NCFA Canada provides education, research, leadership, support and networking opportunities to over 1500+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding industry in Canada. For more information please visit: www.ncfacanada.org.

MEDIA CONTACTS:
Craig Asano
casano@ncfacanada.org
416 618 0254

 

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SEC Updates JOBS Act Amendments Including Reg CF Funding Cap

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Crowdfund Insider | | Apr 5, 2017

Reg CF

The SEC has announced it has adopted amendments to increase the amount of money companies may raise under Reg CF or retail crowdfunding. Initially, Reg CF capped the amount allowable for issuers to $1 million. The SEC has adjusted the amount for inflation and increased the funding limit to $1.07 million. The threshold for investor limits was correspondingly increased in a similar fashion.

While the limit on Reg CF was slightly increased there is a movement in Congress seeking to raise the cap to perhaps $10 million, thus making the exemption more palatable for a wider range of issuers.

The funding cap, along with other limitations, have hobbled the utilization of the Reg CF as many issuers continue to utilize Reg D as it is less costly for companies raising money.

The SEC also approved amendments that adjust for inflation a threshold used to determine eligibility for benefits offered to “emerging growth companies” (EGCs) under the JOBS Act.

“Regular updates to the JOBS Act, as prescribed by Congress, ensure that the entrepreneurs and investors who benefit from crowdfunding will continue to do so,” commented SEC Acting Chairman Michael S. Piwowar. “Under these amendments, the JOBS Act can continue to create jobs and investment opportunities for the general public.”

The SEC is required to make inflation adjustments to certain JOBS Act rules at least once every five years after it was enacted on April 5, 2012.  In addition to the inflation adjustments, the SEC adopted technical amendments to conform several rules and forms to amendments made to the Securities Act of 1933and the Securities Exchange Act of 1934 by Title I of the JOBS Act.

The Commission approved the new thresholds March 31. They will become effective when they are published in the Federal Register.

Section 101 of the JOBS Act added new Securities Act Section 2(a)(19) and Exchange Act Section 3(a)(80) to define the term “emerging growth company” or EGC.  Pursuant to those sections, every five years the SEC is directed to index the annual gross revenue amount used to determine EGC status to inflation to reflect the change in the Consumer Price Index for All Urban Consumers (“CPI-U”) published by the Bureau of Labor Statistics. 

To carry out this statutory directive, the SEC has adopted amendments to Securities Act Rule 405 and Exchange Act Rule 12b-2 to include a definition for EGC that reflects an inflation-adjusted annual gross revenue threshold. 

See:  Katipult Secures Capital Partner for 2017 Growth

The JOBS Act also added new Securities Act Section 4(a)(6), which provides an exemption from the registration requirements of Section 5 under the Securities Act for certain crowdfunding transactions.  In October 2015, the SEC promulgated Reg CF to implement that exemption.  Sections 4(a)(6) and 4A of the Securities Act set forth dollar amounts used in connection with the crowdfunding exemption, and Section 4A(h)(1) states that such dollar amounts shall be adjusted by the SEC not less frequently than once every five years to reflect the change in the CPI-U published by the BLS.  The SEC has adopted amendments to Rules 100 and 201(t) of Regulation Crowdfunding and Securities Act Form C to reflect the required inflation adjustments.

Additionally, Sections 102 and 103 of the JOBS Act provided several exemptions from a number of disclosure, shareholder voting, and other regulatory requirements for any issuer that qualifies as an EGC. The exemptions reduce the financial disclosures an EGC is required to provide in public offering registration statements and relieve an EGC from conducting advisory votes on executive compensation, as well as from a number of accounting and disclosure requirements. 

The SEC said the regulatory relief provided under Sections 102 and 103 of the JOBS Act was self-executing and became effective once the JOBS Act was signed into law.  The technical amendments that the SEC is adopting conform several rules and forms to reflect these JOBS Act statutory changes.

See the full article --> here

The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with both social and investment crowdfunding stakeholders across the country. NCFA Canada provides education, research, leadership, support and networking opportunities to over 1500+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding industry in Canada. Learn more at www.ncfacanada.org.

 

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SEC denies a second application to list bitcoin product

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Reuters | Trevor Hunnicutt | March 28,2017

bitcoin2

NEW YORK (Reuters) - The U.S. Securities and Exchange Commission on Tuesday denied for the second time this month a request to bring to market a first-of-its-kind product tracking bitcoin, the digital currency.

The SEC announced in a filing its decision denying Intercontinental Exchange Inc's NYSE Arca exchange the ability to list and trade the SolidX Bitcoin Trust, an exchange-traded product (ETP) that would trade like a stock and track the digital asset's price. Previously, the regulatory agency said it had concerns with a similar proposal by investors Cameron Winklevoss and Tyler Winklevoss.

"The Commission believes that the significant markets for bitcoin are unregulated," the SEC said in its filing, echoing language from its decision earlier this month on the application by CBOE Holdings Inc's Bats exchange to list The Bitcoin ETF proposed by the Winklevoss brothers. On Friday, Bats asked the SEC to review its decision not to allow that fund to trade.

"We are reviewing the SEC's order and evaluating our next steps," said Daniel H. Gallancy, chief executive officer of SolidX Partners Inc, a U.S. technology company that provides blockchain services. NYSE did not immediately respond to a request for comment.

See:  From IPO to ICO: blockchain’s finance revolution

Bitcoin had scaled to a record of more than $1,300 this month, higher than the price of an ounce of gold, as investors speculated that an ETF holding the digital currency could woo more people into buying the asset.

But after denial of the Winklevoss-proposed ETF, the digital currency's price plunged as much as 18 percent. It has rebounded partially since then and was at $1,041 on Tuesday, roughly unchanged from the previous day.

Bitcoin is a virtual currency that can be used to move money around the world quickly and with relative anonymity, without the need for a central authority, such as a bank or government.

Yet bitcoin presents a new set of risks to investors given its limited adoption, a number of massive cybersecurity breaches affecting bitcoin owners and the lack of consistent treatment of the assets by governments.

Continue to the full article --> here

The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with both social and investment crowdfunding stakeholders across the country. NCFA Canada provides education, research, leadership, support and networking opportunities to over 1500+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding industry in Canada. Learn more at www.ncfacanada.org.

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AngelList Syndicates now available to startups and investors across Canada

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Betakit | | Mar 28, 2017

AngelList logo

Last October, BetaKit reported on the long-awaited arrival of AngelList Syndicates to Canada, albeit in limited form, following the Ontario Securities Commission’s (OSC) decision to allow Ontario investors to lead and participate in AngelList Syndicates as part of a two-year trial program. Back then, AngelList’s advisor to Canada, Alex Norman, said it would be “just a matter of time until it’s across Canada.”

“Founders are building great companies from coast to coast and we can now help them succeed.”

As of today, AngelList Syndicates are available across Canada. Any Canadian startup can now raise funds on the platform, and accredited Canadian investors can now apply to invest on the platform (unsure if you’d qualify? read our extensive breakdown of how AngelList works).

“We are excited that the CSA [Canadian Securities Administrators] has approved AngelList Syndicates countrywide,” Norman told BetaKit. “Founders are building great companies from coast to coast and we can now help them succeed by providing access to capital/funding via the AngelList platform.”

See:  Angel investing was always male-dominated. That’s finally changing

As part of the October announcement, Creative Destruction Lab and NEXT Canada were identified as the two launch members of the OSC’s Approved Incubator Program, which allows investors to invest in a subset of companies and not count towards the Ontario investor limit (more on that here). Since then, the OCE and YEDI have been added to the AIP list, and is looking to take applications from organizations across Canada. Interested incubators, accelerators, “technology transfer offices” and organizations that meet the criteria listed below should drop AngelList a line via email.

Continue to the full article --> here

The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with both social and investment crowdfunding stakeholders across the country. NCFA Canada provides education, research, leadership, support and networking opportunities to over 1500+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding industry in Canada. Learn more at www.ncfacanada.org.

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Are Overseas Portals the Next Big Thing in US Equity Crowdfunding?

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Crowdfund Insider | By | March 21, 2017

Non-resident US funding portal registration

Much excitement has been generated with the enactment of Regulation Crowdfunding (Reg CF) and the ability of non-accredited investors to invest in startup companies in the United States. The SEC recently reported that while early capital raising efforts is still growing, Regulation Crowdfunding has provided a new mechanism for small, domestic issuers to raise capital that was previously unavailable.

There is speculation that soon, with a Republican Administration in Washington focused on deregulation, Regulation Crowdfunding may be a “huge” beneficiary, including an expansion permitting an issuer to raise $5 or perhaps even $10 million per annum, rather than the current $1 million limit. While a common complaint during its first year is that the issuers themselves must be domestic United States companies, the same does not hold true for crowdfunding portals.

Regulation Crowdfunding specifically permits “nonresident” funding portals to operate in the United States.

A nonresident funding portal is a funding portal incorporated in or organized under the laws of a jurisdiction outside of the United States, or having its principal place of business in any place not in the United States. Thus you can operate overseas and still be permitted to engage in business as a U.S. funding portal.

See:  Title III Crowdfunding For Real, Part I

Nonresident portals can quickly broaden US crowdfunding efforts to overseas, and raise foreign investor (crowd) capital for US companies. This together with the benefit that a crowdfunding portal is specifically exempt from broker-dealer registration under Exchange Act section 15(a), provides ample incentive to foreign entrepreneurs to seek to participate in US small issuer capital formation.

Nonresident funding portals share the same benefits as domestic funding portals, including the right to post offerings on their portal and receive transaction-based compensation (commission and equity) for their services. Nonresident funding portals may even have a competitive advantage in accessing capital for US crowdfunding offerings. MrCrowd.com and its CEO Allen Au, based in Hong Kong, appear to be the first nonresident funding portal to see an opportunity and become registered with FINRA.

For the US Securities and Exchange Commission (SEC) to permit nonresident funding portals to be based outside of the US, the portals must be subject to SEC and Financial Industry Regulatory Authority (FINRA) regulation. Registration of a nonresident portal is conditioned on an information sharing arrangement in place between the SEC and the competent regulator in the jurisdiction under the laws where the nonresident funding portal is organized or has its principal place of business.

Continue to the full article --> here

The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with both social and investment crowdfunding stakeholders across the country. NCFA Canada provides education, research, leadership, support and networking opportunities to over 1500+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding industry in Canada. Learn more at www.ncfacanada.org.

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Presentation Decks from #CCS2017 (for Attendees ONLY)

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Thank you for attending the 2017 Canadian Crowdfinancing Summit (#CCS2017)!

CCS2017 Don't miss it!

 

CCS2017 Presentation Decks Available for Attendees Only (otherwise Confidential)

FEB 28:  Pre-Summit Workshops (OneEleven)

  1. FundingNomad Session:  Profit-Sharing or Royalty Deals for Investors & Issuers (download)
  2. Crowdmatrix Showcase:
  3. BrightSpark Ventures Workshop:  How to Invest in Early Stage Companies (download)
  4. R2Crowd Presentation:  How to Invest in Real Estate if You Don't have a Rich Uncle? (download)

MAR 1:  CCS2017 Summit (MaRS)

  1. Morning Keynote: Equity Crowdfinance:  Past, Present and Future by Ryan Feit, SeedInvest (download)
  2. Show me the Money: How We Raised USD $100+ Million (Art or Science?)
    by Zach Smith, Funded Today (download)
  3. Canadian and Global Alternative Finance Markets: Volume, Trends and Key Indicators by E.J. Reedy of University of Chicago - Polsky Center for Entrepreneurship & Innovation, Alixe Cormick of Venture Law Corp and Daryl Hatton of FundRazr (download)
  4. Blockchain ICOs:  The Future of Online Investing or Regulatory Crisis? by Alan Wunsche, Blockchain Canada (download)
  5. How Online Funding Platforms Give Voice to a Shared Value Economy by Paul Allard, Impak Finance (download)
  6. Marketplace Lending:  Made for the People, By the People by Cato Pastoll, Lending Loop (download)
  7. Growing Your Business Faster with Diversity by Tabitha Creighton, iQMetrix and Eva Wong, Borrowell (download)
  8. Industry Experts and National Regulatory Perspectives: What to Expect in 2017?  by Jason Saltzman, (Gowling WLG), Pat Chaukos (OSC LaunchPad), Elliott Mak and Zach Masum (BCSC), Denise Weeres (ASC), and Gabriel Araish (AMF) (download OSC deck)
  9. LUNCH & LEARN:  Strategies to Protect Your Revenue by Securing Intellectual Property (IP) Rights before Launching by Tony Sebata, Sabeta IP (download)
  10. Regulatory Presentation and Q&A:  FINTECH & P2P/ONLINE LENDING 
    1. Part 1:  Zach Masum, BCSC (download); and
    2. Part 2:  Amy Tsai, OSC LaunchPad (download)
  11. Bootstrapping:  From Concept to Revenue Under in 9 Months for Under $4k by Timothy Jodoin, Edispin (download)
  12. Regulatory Presentation and Q&A:  EQUITY CROWDFUNDING/FINANCE by Gabriel Araish (AMF), Elliott Mak (BCSC), Gloria Tsang (OSC), and Denise Weeres (ASC) (download)
  13. Applying Design Thinking to Maximize Interaction on Your Website (Coming soon)
  14. How I Created an Automated Networking Machine to Meet Hundreds of Investors & VCs by Joshua Fetcher, Autopilot (download)
  15. Post-Crowdfunding Best Practices:  How to Deliver On Time On Budget - Everything you need to Know by Gareth Everard (Rockwell Razors), Owen MacMullin (DHL Canada), and Mary-Rose Sutton (Shopify) (download)
  16. The Future of Fintech:  Is Canada becoming a World Class Fintech Hub?  by Sue Britton (Fintech Growth Syndicate), Bilal Khan (OneEleven), Jake Hirsch-Allen (LinkedIn), Jim Orlando (Omers Ventures), Amelia Young (Upside Consulting Group) and Philippe Garneau (BWG Brand Engineering) (download)
  17. CLOSING KEYNOTE:  Transformative Strategies and Insights for Alternative Finance Market Growth by Martin Graham (Fineqia and London Stock Exchange) (download)

Live Pitching Presentation Decks (MaRS):

  1. Seedlify by Sam Kawtharani (download)
  2. Tripian by Cenan Yunusoglu (download) *Session 1 Pitch Winner
  3. XYZ Interactive (UVolt replacement) by Michael Kosic (download)
  4. Curexe by Johnathan Holland (download)
  5. Knote by Ron Glozman (download) *Session 2 Pitch Winner
  6. Zoom.ai by Roy Pereira (download)
  7. DashMD by Zack Fisch (download) *Session 3 Pitch Winner
  8. Better Current by Colin Campbell (download)
  9. CertClean by Jenise Lee (download)
  10. ShareWiz by Oz Demirel (download)
  11. Emerge by Alexandru Horghidan (download) *Session 4 Pitch Winner
  12. Triclops Technologies by Meng Xi Zhu (download)

Congratulations to the 4 live pitching companies:

Tripian (Cenan Yunusoglu), Knote (Ron Glozman), Dash MD (Zack Fisch), and Emerge (Alexandru Horghidan)!


Other links you may be interested in:

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THANK YOU TO ALL OUR #CCS2017 SPONSORS AND PARTNERS!

CCS2017 Partner slide 1

CCS2017 Partner slide 2

The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with both social and investment crowdfunding stakeholders across the country. NCFA Canada provides education, research, leadership, support and networking opportunities to over 1500+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding industry in Canada. Learn more at www.ncfacanada.org.

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