Equity Crowdfunding Takes Shape in Canada

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TechVibes | Daryl Hatton | December 19, 2013

Crowdfunding logoThe emerging prospect of equity crowdfunding, something early-stage companies have long gunned for as a cheaper alternative to IPOs, is currently perched on the lip of becoming reality in this country. And that’s sent lawmakers keen to regulate it scrambling in equal measure with caution-spouting fusspots worried about its impact on our collective economic well-being.

There’s actually been lots of action on this front of late. Saskatchewan has implemented crowdfunding legislation, with its Financial and Consumer Affairs Authority declaring that small businesses and startups in that province are free to sell stakes in their companies to residents through the Saskatchewan Equity Crowdfunding Exemption.

Ontario and BC, meanwhile, are hammering out their own proposals, and the Ontario Securities Commission’s prospectus crowdfunding exemption is expected to be published in the first quarter of next year.

Those that object to the concept say it throws wide the potential for fraud. In a letter penned to the Saskatchewan Financial and Consumer Affairs Authority, the Federal Accountability Initiative for Reform Canada expressed “grave concerns” that the FCAA might not regulate equity crowdfunding portals.

Related:  FCAA Approves Equity Crowdfunding in Saskatchewan!

View:  NCFA's response to FAIR Canada's "Let's Protect Investors from Risky Startups"

“In our view,” goes the note, “regulation of portals is essential to providing a minimal level of consumer protection to potential crowdfunding investors ... Permitting equity crowdfunding transactions through unregulated portals would be a complete abandonment of the FCAA’s consumer protection mission.”

At FundRazr, we believe these naysayers embrace their stance on investor protection a bit too rabidly. A company owner should be able to sell shares in his operation to whomever he pleases, thankyouverymuch, and to do so without benefit of a government-enforced intermediary (whose participation in the affair is expensive thanks to all the legal protections these anxious CEOs would have to put into place to avoid getting sued).

Evidently, these worrywarts would have us exchange the long-entrenched notion of “buyer beware” for a nanny state on a blind mission to protect the apparently at-risk rest of us.

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The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada crowdfunding hub providing education, advocacy and networking opportunities in the rapidly evolving crowdfunding industry. NCFA Canada is a community-based, membership-driven entity that was formed at the grass roots level to fill a national need in the market place. Join our growing network of industry stakeholders, fundraisers and investors. Increase your organization’s profile and gain access to a dynamic group of industry front runners. Learn more About Us | Prezi or contact us at casano@ncfacanada.org.

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