OSC Finalizes 2013-2014 Statement of Priorities – Comments on the Exempt Market and Capital Raising (including Crowdfunding)

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By Brian Koscak, Chair EMDA, Partner, Cassels Brock & Blackwell LLP

OSC

The Ontario Securities Commission (OSC) published its final 2013-2014 - Statement of Priorities in the OSC Bulletin today.  On April 4, 2013, the OSC published a draft Statement of Priorities and requested feedback.

The OSC provided a summary of the comments and stated, among other things, that a significant number of comments focussed on exempt market issues including alternative capital raising exemptions and possible adoption of an offering memorandum (OM) exemption in Ontario to increase and expand the capital raising capabilities of exempt market dealers.

Concerns were expressed about non-compliance with current exempt market rules, a perception of weak oversight and questions about the OSC's ability to ensure adequate compliance with the rules should it broaden the available exemptions.

It was suggested that regulators do not have adequate data regarding the exempt market in Canada from which to make informed decisions on new exemptions, including crowdfunding.  The OSC further stated that support for exempt market changes was mixed with some calling for implementation of a harmonized OM exemption that is applicable in all CSA jurisdictions with others completely opposed or expressing caution against the introduction of any new exemptions absent adequate data regarding the exempt market in Canada.

Almost all commenters were opposed to crowdfunding citing investor protection concerns. The OSC stated that this lack of congruity in support for any one exempt market policy option is evidence of the need for continued consultations and review of the options that are proposed.

Despite the above concerns, the OSC stated that it recognizes that cost-effective access to capital is critical to companies of all sizes to grow and develop. To address growing interest in alternative capital raising techniques, such as crowdfunding, one of the OSC’s Key Regulatory Priorities for 2013-2014 will be to further consider the regulatory issues posed by these new capital-raising strategies.

Moreover, if appropriate, the OSC stated it will propose changes to its current offering rules to facilitate capital formation for small businesses while maintaining important investor protections provided under securities law.  The OSC’s Action Plan and Success Measures for businesses and investors who may not have adequate access to capital or investment opportunities in the exempt market are discussed below.

Action Plan

1. Complete stakeholder consultations and assessment of feedback on exempt market consultation paper published in December 2012
2. Engage businesses and business associations on access to capital, through outreach such as OSC in the Community
3. Determine options to move forward on expanding ways to access capital for issuers in Ontario and publish progress update

Success Measures

1. The OSC will better understand the risks and opportunities associated with expanding access to capital in the exempt market
2. Analysis of feedback will be completed
3. Proposals will clearly reflect the balance between promoting access to capital and efficient capital formation with investor protection

2013-2014 -- OSC Statement of Priorities --> here

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