David Durand, Advisor, Innovation and Advocacy
September 9th, 2020
David Durand, LL.L., B.Sc. chem., – Founder and Managing Partner of Durand Lawyers – Lawyer (Québec)[...]
Category Archives: Online Funding Portals
Amex Acquires SoftBank-backed Kabbage After Tough 2020 for the SMB Lender
Techcrunch | Ingrid Lunden | Aug 17, 2020
Small and medium businesses have been some of the hardest hit in the coronavirus pandemic, and in many cases that has had a knock-on effect on the companies that provide services to them. Now, a startup that built a whole business around loaning money to SMBs has been acquired by a giant in the world of credit as the fintech industry begins to size up what the “new normal” will look like when it comes to doing business with smaller businesses.
Kabbage, which had built a platform that uses machine learning algorithms to assess and loan out money to small business owners, is getting gobbled up by American Express, the two companies announced today. Amex says it has “millions” of small business customers and the addition of Kabbage’s loan and other financial services tools signifies that it plans to double down on that sector with a much wider range of offerings.
See: Dealing with a crisis: FinTech versus Bank
The financial terms of the deal are not being disclosed, but reports earlier this month put the value of the acquisition at up to $850 million. For some context, Kabbage had raised nearly $990 billion in debt and equity (and at least $3.5 billion in securitizations), and was valued at over $1.2 billion in its last equity round of $250 million, in 2017, led by SoftBank.
The acquisition comes at a tricky time not just for SMBs but also the fintech companies that serve them, and specifically for Kabbage itself, with all of them weathering the storms of COVID-19.
Amex’s acquisition, tellingly, will include employees, technology and financial data, but “Kabbage’s pre-existing loan portfolio is not included in the purchase agreement,” Amex noted in its press release.
As for what happens with that loan portfolio, a spokesperson for Kabbage said there will be a separate entity that manages and services these loans at the time of close.
We don’t have a total amount of value for that loan book, but a spokesperson confirmed it includes not just loans that Kabbage had issued in its previous years of operation, but also loans made to SMBs in the U.S. under the Paycheck Protection Program. As of last week the latter totaled $7 billion across nearly 300,000 loans; and in 2019 Kabbage told TechCrunch it was on pace to loan out between $2.5 billion and $3 billion, so the pre-existing loan portfolio is not insignificant, and in current economic times, possibly one that comes with a lot of risk.
The news caps off an interesting run in the world of fintech that has seen Kabbage hit some significant ups and downs. The company attracted the attention of SoftBank and many other investors (and customers) on the back of a fast-growing business based around the idea of using artificial intelligence to speed up the process of small businesses applying for and subsequently getting loans.
See: Advisory experts back P2P lending sector to become mainstream investment class
Disrupting traditional banks and their slow and often frustrating approach to evaluating loan applications, Kabbage taps a wide variety of sources, from traditional accounting statements through to social media signals, into its proprietary machine learning algorithms, in order to determine eligibility for issuing loans, and the terms under which a business would pay it back. It was successful enough that Kabbage was also offering its product as a white-label service to other loan providers (including the banks it was disrupting).
“For several years, American Express has been expanding beyond our industry-leading commercial card products to offer our business customers a growing set of payment and working capital solutions,” said Anna Marrs, president of Global Commercial Services at American Express, in a statement.
“This acquisition accelerates our plans to offer U.S. small businesses an easy and efficient way to manage their payments and cash flow digitally in one place, which is more critical than ever in today’s environment. By bringing together Kabbage’s innovative technology and talented team with our broad distribution capabilities and over 60 years of experience backing small businesses, we can better help our customers successfully emerge from this challenging period and beyond.”
Continue to the full article --> here
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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CONGRATULATIONS TO THE 2020 FINTECH DRAFT PITCHING AND DEMO COMPANY WINNERS!   |
Seedrs Founder Jeff Lynn: We are experiencing meaningfully higher levels of fundraising and investment activity than the same time last year
Crowdfund Insider | | Aug 11, 2020
Seedrs is a top UK based investment crowdfunding platform that is active in both the UK and continental Europe. Launched in 2012, Seedrs is a trailblazer in online capital formation for early-stage ventures. Since inception, Seedrs has booked over 1100 funded deals recording about £950 million in investment while hosting the most robust marketplace for secondary transactions for crowdfunded securities. Many well-known tech-names have utilized the platform to raise growth capital while enlisting a wider audience of investors that may become unofficial brand ambassadors. Revolut, one of the top UK based digital banks, has crowdfunded on Seedrs.
When COVID dropped the world into a global pandemic, like almost all businesses, Seedrs was impacted. Yet out of the shattering economic decline, Seedrs, like some other online investment platforms, has adapted and in many respects thrived. Seedrs quickly embraced the Future Fund schemed crafted by HM Treasury to help support startups and early-stage ventures that did not qualify for loan based Coronavirus support programs. In the weeks since the Future Fund became actionable, Seedrs has helped dozens of early-stage firms to utilize the government program to raise matching funds in a convertible security offering. Seedrs is probably the most active digital platform leveraging the Future Fund.
See: NCFA Open Letter: Government should collaborate with Fintechs to Recovery the Economy Faster
Seedrs co-founder Jeff Lynn was Seedrs longtime CEO until passing the baton over to Jeff Kelisky and stepping into the role as Chairman of the firm. As Chairman, Lynn has remained a staunch advocate of Seedrs’ mission to recreate early-stage funding Recently, Crowdfund Insider queried Lynn about Seedrs performance during the COVID pandemic. Our conversation is below.
How has Seedrs adapted to the new environment of social distancing and remote work?
Jeff Lynn: As a digital business, we’re very fortunate that we’re able to work remotely, and that we can continue to provide the same level of service to our entrepreneurs and investors as we could when we were in the office. That being said, I think the whole team misses getting to work together in person, and looks forward to being back in the office eventually.
Do you anticipate that some of these changes will stick long term?
Jeff Lynn: Like many businesses, we are having a conversation with our team about how to combine the benefits of working from home, which we’ve all experienced over the last few months, with the value that comes from being in the office. I don’t know where that will land in the long run, but it would not surprise me if we see a general shift in the working world — at least among digital businesses — to one in which most people work in the office a few days a week and at home the other days.
See: Ontario introduces interim registration and prospectus exemptions to facilitate start-up securities crowdfunding
Seedrs quickly moved to list issuers under the Future Fund scheme. How many issuers have participated in this program? How is it working out so far?
Jeff Lynn: It’s been great. The Future Fund is a very important initiative that has helped to unlock private capital during a time when it might have frozen up, while at the same time providing additional government funding in order to extend runways and help businesses navigate (and in some cases continue to grow) through this crisis. So far we’ve had 26 Future Fund campaigns, and there are more to come. We’re very pleased to be able to play a part in this powerful and unusual funding opportunity.
Just recently, variable pricing was announced for Seedrs Secondary Market – a significant change. How is your marketplace progressing? A quick glance displays a lot of green (higher values).
Jeff Lynn: We’re thrilled with the continued growth of the Seedrs Secondary Market. It is one of the pillars of our well-publicised efforts to move beyond crowdfunding and toward becoming a full-scale marketplace for private capital. And the introduction of a basic form of variable pricing, which launched this month, is a key part of the Secondary Market’s evolution. We won’t know the exact impact on numbers until after this month’s trading cycle closes, but just based on observation it looks like there has been a significant takeup of the opportunity to offer shares at a premium or discount.
Continue to the full article --> here
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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CONGRATULATIONS TO THE 2020 FINTECH DRAFT PITCHING AND DEMO COMPANY WINNERS! |
Bid – Ask: Seedrs Secondary Market Now Allows Variable Pricing for Listed Securities
Crowdfund Insider | | Jul 27, 2020
Seedrs
has long been an innovator in the secondary market for crowdfunded securities. Today, the leading UK based crowdfunding platform is announcing variable pricing for its secondary market.
Launched in 2017, Seedrs Secondary Market has continued to iterate and add new features and functionality. Of course, the biggest challenge is liquidity but that is something that should resolve itself over time as the platform grows and external issuers utilize the marketplace.
According to a recent blog post, Seedrs July market volume saw levels return to their “pre-Revolut levels of trading.” Seedrs states that during the July opening, 907 share lots were sold worth £229,000. There were 456 buyers and 423 sellers trading in securities issued by 162 businesses at an average value per business of £1.4k. Seedrs reports that each seller made an average profit of £202.
See: OSC LaunchPad approves TokenGX (Tokenfunder) for Secondary Trading of Digital Securities
Variable pricing should make it easier for buyers and sellers to make a market by matching supply with demand more effectively.
In an email, Seedrs founder and Chairman Jeff Lynn said variable pricing represents an “important milestone in our work to be a full-scale marketplace for private investments.”
“The change will work as follows. Previously, as a prospective seller, you have only been able to list shares on the Seedrs Secondary Market at the set price we determine under our Valuation Policy (which is usually the company’s latest valuation). Buyers in turn have only been able to buy the shares at that price. Starting now, however, we will allow sellers to list their shares at a premium or discount price – up to 30% above or below the marked share price – if they so choose. Buyers will see each share lot and the price at which it is listed, and they can make their investment decision accordingly.”
The change is effective as of today and will be available during the August market day.
Continue to the full article --> here
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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CONGRATULATIONS TO THE 2020 FINTECH DRAFT PITCHING AND DEMO COMPANY WINNERS! |
MoneyMates: Slaying predatory lending
NCFA | Samuel He, Market Research Analyst Intern | July 3, 2020
Source: P2PMarketData
Today, millions live paycheck to paycheck, struggling to get by financially. This lack of resources and a poor credit score makes getting a loan difficult. And the options that are available, make the problem worse with high rates and aggressive rules.
Traditional payday loans use aggressive deadlines and lump sum payments that often results in the customer spiraling into a debt trap.
The challenge for the customer is accessibility to resources and the opportunity to improve their credit capacity for future, cheaper loans.
Founded by Samir Issa, MoneyMates is an alternative lender that prioritizes the welfare of its customers by offering expert guidance not just on getting the loan, but how to improve their credit situation.
See: Shopify expands capital lending program to help Canadian merchants weather COVID-19
They do this by offering customers an extended repayment period of up to two months rather than the typical two weeks. In the event of a missed payment, MoneyMates will work with the customer on a solution to avoid additional fees and penalties.
MoneyMates has also added a unique savings feature to help borrowers accrue savings. Customers are given the option to choose a savings amount when borrowing, which is set aside and deposited into the account along with any bonuses once the loan has been paid off. The approach helps borrowers understand both what they are borrowing and what savings can be accrued to help them avoid future emergency loans.
The objective is to provide vulnerable borrowers with better financial health, expanding access to financial services and a sense of empowerment.
Interested in seeing MoneyMates pitch at FFCON20 DIGITAL's Fintech Draft Competition?
Inspired by sports league drafts, the inaugural FFCON20 annual Fintech Draft is designed to identify and feature emerging and high growth fintech startups and scaleups. Qualifying Fintech Draft participants will be profiled online and reviewed by expert fintech scouts, and will compete in one of two (2) Fintech Draft competitions. Draft finalists compete at FFCON20 DIGITAL: RISE between Jul 9 – Aug 27, 2020 for exposure and prizes including promotion to investors, media, and partners and a 1 year industry partnership with NCFA.
Be sure to give them a vote and show your support! Check out their profile and competition here: https://fintechandfunding.com/shortlisted-draft-companies/
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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CONGRATULATIONS TO THE 2020 FINTECH DRAFT PITCHING AND DEMO COMPANY WINNERS! |
FundThrough Commits $10 Million to Help SMBs Overcome Shutdown
FundThrough Blog | Jun 26, 2020
TORONTO – FundThrough, North America’s leading invoice funding solution for small businesses, has announced it will provide $10 million in free funding for clients as the economy reopens from COVID-19. The company announced it as part of a broader initiative to help small businesses, who invoice their customers and wait to for invoice payments, get back on their feet in the wake of the COVID-19 economic shutdown and has expedited this capital commitment for SMBs looking for a practical source of funding.
The Toronto-based Fintech company will provide working capital to small businesses in exchange for outstanding customer invoices, based on the creditworthiness of the payor. Clients that sell goods and services to larger customers and need working capital quickly are encouraged to apply.
“We are proud to announce this initiative to help kick start the North American economy and ensure that companies get paid immediately for the work they have completed and the products they have delivered,” said FundThrough Co-Founder and CEO Steven Uster. “Large companies often stretch out their payment terms for their suppliers. We are levelling the playing field so that suppliers no longer have to act as a bank for their customers.”
FundThrough will provide the funding through its next-generation invoice factoring platform, Velocity. Once onboard, clients can upload their outstanding customer invoices, update their account and payor information, and quickly receive their funding request. The quick influx of cash could provide companies with the working capital they need during a period of uncertainty. Factoring also provides a unique alternative to traditional funding methods.
See:
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The Intersection of Small Business, Tech and Our Financial Ecosystem is More Important Than Ever
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NCFA Open Letter: Government should collaborate with Fintechs
“One of the biggest challenges for small businesses will be to get paid for the first projects that they complete as the economy reopens,” said Deepak Ramachandran, FundThrough co-founder and Chief Technology Officer. “We’ve already seen large companies extend their payment terms from 30 or 60 days to 90-120 days. So, if a supplier completes an order and has to wait four months to get paid, it may feel a lot like they are shut down once again. FundThrough can get them their money within 48 hours of invoicing, so they can keep working on the next order.”
Small businesses seeking funding for their outstanding invoices can visit FundThrough.com for more information.
About FundThrough
FundThrough is a leading player in the fintech small business working capital space. Its tech-enabled invoice funding platform has re-imagined invoicing so that businesses who sell to larger customers can get paid instantly. FundThrough enables business owners to eliminate “the wait” associated with payment terms. For more information, go to www.fundthrough.com.
View: original release
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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CONGRATULATIONS TO THE 2020 FINTECH DRAFT PITCHING AND DEMO COMPANY WINNERS! |
Cambridge launches the Global Alternative Finance Industry Benchmark & Covid-19 Rapid Assessment Survey in Partnership with World Bank Group and World Economic Forum
Cambridge Centre for Alternative Finance | Tania Zielgar | Jun 17, 2020
NCFA Intro: NCFA is please to provide continued support as a National industry partner of the Cambridge Centre for Alternative Finance research initiatives in Canada. It's absolutely essential that data and research be collected and anlayzed to help identify trends, inform policy and understand the state of industry during these times of global risk and innovative change. We strongly advise all fintech firms, research partners and anyone who is able to help this important survey collection initiative by completing the survey and sharing it widely among your network.
Overview of the Global Alternative Finance Industry Benchmark & Covid-19 Rapid Assessment Survey
For the past several years, the CCAF has produced comprehensive industry-focused research on the evolution of alternative finance; documenting and analysing the development of Crowdfunding, P2P/Marketplace Lending and other FinTech markets from across 190 countries.
This year’s benchmarking survey will also include the recently launched The Global Covid-19 Fintech Market Rapid Assessment Study, in partnership with the World Bank Group and the World Economic Forum. The empirical data collected will be used to understand Covid-19’s impact on the FinTech markets, how the global FinTech industry has responded and some of the immediate regulatory and policy implications. This research program has resulted in 20 reports, which are disseminated freely to inform policy and raise public awareness of alternative finance. This research has provided unique detail and insight into the changing FinTech landscape, creating a valuable evidence-base for policymakers, regulators, and industry stakeholders to utilize when evaluating the FinTech ecosystem within their local context or from a globally comparative perspective.
The Fintech landscape is changing rapidly as a result of Covid-19. This report, and the historical data on this industry more broadly, provide signposts as to the general development trajectories of firms when faced with this pandemic, and where strengths and weakness may lie.
The survey will hence include two key components:
1. Time-series data required to continue the CCAF long-standing tradition of benchmarking and scoping the industry (referring to your 2019 activities), and
2. Covid-19 focused time-sensitive data on a) market performance, b) regulatory needs & policy asks, and c) operational changes & implications.
The long-term impact of Covid-19 is yet to be known. By coupling longitudinal data with this research initiative, we can begin to test the resiliency of this market and provide clear, evidence-based assessments on how the sector will continue to develop.
As with all our reports, the Global Covid-19 Fintech Market Rapid Assessment (anticipated publication Q3) and the Annual Global Alternative Finance Industry Report (Q4) will be made available to the public and actively disseminated to provide key insights to regulators, policymakers and key industry stakeholders.
Thanks in advance for your contribution to the study: Take the Survey Now
https://jbs.eu.qualtrics.com/jfe/form/SV_7PRyNSA3B5IKIrX
The Covid-19 pandemic presents both serious challenges and potential opportunities for the global FinTech industry to grow and scale, with the long-term effects yet unknown. By coupling the CCAF’s longitudinal data with this exciting research initiative, we can begin to test the resiliency of this market and provide clear, evidence-based assessments on how the sector will continue to develop.
This Study will provide a global assessment of the FinTech ecosystem’s responses to the Covid-19 pandemic, with particular attention to the industry’s response to challenges and their regulatory and policy concerns. This survey will result in a jointly published report between the CCAF, World Bank and World Economic Forum, and will be made available online. You can find further information on the Study in the accompanying press-release.
The survey will close on July 31st. If you have any questions or comments, please feel free to contact the CCAF research team directly: Tania Ziegler (t.ziegler@jbs.cam.ac.uk).
Take the survey now --> here
Other links you may like:
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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CONGRATULATIONS TO THE 2020 FINTECH DRAFT PITCHING AND DEMO COMPANY WINNERS! |
NCFA Response to CSA on NI 45-110 Harmonized Securities Crowdfunding Rules
NCFA Canada | Craig Asano | May 27, 2020
NCFA SUBMISSION TO CSA ON PROPOSED HARMONIZED RULES FOR START-UP SECURITIES CROWDFUNDING (NI 45-110)
The Canadian Securities Administrators (CSA) are seeking comments on proposed harmonized rules for start-up securities crowdfunding by 27 May 2020.
The National Crowdfunding and Fintech Association of Canada (NCFA) welcomes this initiative. The following addresses the specifics of the proposed rules, but please see our previous submissions on crowdfunding in Canada on our website in the advocacy section for more details – https://ncfacanada.org/advocacy/.
1. Harmonization
NCFA has argued for many years that CSA crowdfunding rules are unduly constraining, and this enhanced harmonization will enable a greater use of crowdfunding across Canada, help to fill a funding gap, and allow more retail investors to invest in businesses whose purpose they support.
2. Impact of the pandemic on fundraising
Today, early stage Ventures are the most likely not to get funded as they lack established relationships with banks (including BDC) and they have been amongst the hardest hit by the pandemic. Many VC funds are moving towards growth equity (later stage) investing and foreign investors mainly invest at later stages.
3. Funding cap
While the maximum total amount that could be raised by a business under the crowdfunding prospectus exemption per year would increase from $500,000 to $1 million, we continue to support a much higher amount of $5 million (and that a broader range of companies be able to participate). In the US, where Reg CF has shown reasonable success, proposed SEC changes to Reg CF include increasing the maximum raise from $1 million US to $5 million. In the result, “the industry is poised to take off”. See – https://crowdfundcapitaladvisors.com/downloads/regulation-crowdfunding-4-years-in-review/ and https://www.sec.gov/news/press-release/2020-55.
We note the 60% success rate in 2019 mentioned in the above US report, and the failure of the researchers to find any evidence of fraud. Unfortunately, so far as we are aware, similar data is not collected in Canada.
We also note that the US is joining other jurisdictions to enable a higher raise, for example:
- in Australia: companies can raise AUD 5M (https://ncfacanada.org/5-million-equity-crowdfunding-extended-to-private-companies/)
- in the UK and Germany: companies can raise €8M (https://www.crowdfundinsider.com/2018/07/135781-uk-government-ups-crowdfunding-without-prospectus-to-e8-million-matching-germany/).
4. Investor cap
While we welcome the proposal to increase the maximum investment an investor can make in a distribution to $2,500 (from $1,500), with a higher limit of $5,000 if the purchaser obtains advice from a registered dealer, again we think the limit should be higher.
The investor cap should be raised to at least $5,000 per distribution, or $10,000 a positive suitability determination by a registered dealer. The commission may also consider implementing a maximum investment value per calendar year across all distributions such as $50,000 maximum per calendar year for an eligible investor.
What little data we have in Canada shows that the success rate of crowdfunded start-ups is relatively high (compared to all start-ups) and that investors, if educated about crowdfunding, welcome the opportunity to invest directly in ideas that they can connect with. In other jurisdictions, crowdfunding is an important source of start-up capital.
We need to make start-up capital easier to access in Canada and to make the system more competitive with other jurisdictions:
- UK does not have an investor cap
- In Australia, retail investors can invest up to 10,000 AUD per year
- In Germany, there is a limit of 10,000 EUR per investment for private individuals, but they cannot invest more than double their monthly net income
- 90% of the US States which have adopted or are considering adopting an intrastate crowdfunding exemption have chosen either $5,000 or $10,000 per single investment, unless the investor is accredited.
Eligible investors should be able to invest up to $100,000 with a positive suitability determination by a registered dealer
Accredited investors should be able to invest without caps (as they may already invest an unlimited amount under the accredited investor exemption).
The commission should consider expanding the accredited investor exemption definition to allow a category of ‘qualified accredited investors’ that any individual can qualify if they pass a formal test, such as the Canadian Securities Course (CSC) or equivalently demonstrate the knowledge and ability to accept risks involved. This would encourage more qualified Canadians to participate in private capital markets and be inline with similar initiatives in the U.S..
5. Working capital certification
A funding portal relying on the start-up crowdfunding registration exemption must deliver to the regulator in each jurisdiction a completed Form 45 110F5 Annual Working Capital Certification within 10 days of each calendar year-end. The portal must certify that it has sufficient working capital to continue its operations for at least the next 12 months. If the funding portal becomes insolvent or discontinues operations, it must promptly notify the securities regulatory authority or the regulator, and any purchasers for which it holds assets, of the process the portal will use to return the assets to these purchasers.
While a portal must be and remain solvent to operate, we believe that maintaining a 12 month capital requirement for crowdfunding dealers and funding portal registrants would be challenging especially given the pressure of small margins and the impact of COVID-19 now and for the foreseeable future.
6. Statutory liability
Under the Instrument, issuers, and in some jurisdictions, the directors and executives signing the offering document will be subject to statutory liability if the offering document provided to the investor contains a misrepresentation.
Due to the more limited resources of smaller issuers, this provision should only apply where the aggregate proceeds exceed $1.5 Million.
7. Eligible securities
These are: a common share; a non-convertible preference share; a security convertible into a common or a preference share; a non-convertible debt security linked to a fixed or floating interest rate; and a unit of a limited partnership.
- We would like to suggest that convertible preference shares be considered eligible securities within this instrument.
- Units of a trust should also be included as eligible securities.
8. Sunset clause
The absence of an expiry date in the instrument will enhance certainty for market participants.
9. Repeal of MI 45-108
MI 45-108 should be repealed.
10. Reports of Exempt Distribution
The regulator should consider fee reduction for filing reports of exempt distributions - these can add up to around $1,500 per raise which is a significant fee particularly for a smaller issuer. One potential way to manage this would be to allow registered dealers and funding portals to file reports of exempt distributions in batches (ie. once a quarter) and only pay a single fee per batch of transactions.
11. Peer-to-Peer Lending
The securities regime should contemplate a separate set of requirements for non-convertible loans made between a borrower and lenders. In other jurisdictions, such a transaction comes with a much lighter regulatory burden which is important for it to be feasible for a peer-to-peer lending market to exist.
Specifically, no offering document should be required to be prepared by a borrower where the transaction taking place is a simple loan made between lenders and a borrower - rather the loans should be made under a standard form loan agreement facilitated by a platform. In order to minimize burden on the borrower, the platform should be required to undertake certain due diligence on the borrower and determine an interest rate, loan amount and repayment structure - the borrower would thereby only be required to execute a loan agreement in order to transact in this capacity.
The current proposed regime would result in adverse selection bias as only borrowers that are less creditworthy would be likely to go to the lengths required under the crowdfunding regime as there are currently other options in the market to raise capital that are less burdensome for the borrower such as private lenders.
12. General comments
NCFA continues to ask for government support to ensure the Canadian fintech sector is not being held back and remains competitive with international comparators such as in the UK and US including:
- Improved data collection-analysis and reporting transparency. The lack of basic data (mirroring what is happening with respect to Coronavirus) is a recurring theme that requires a solution. NCFA is willing to collaborate with any government to help develop and provide a solution;
- Allow advertising and general solicitation;
- Consider bad actor check on management and beneficial shareholders (shared database);
- Provide (funding for) ongoing education;
- Take advantage of proven tax and other incentives;
- Be proactive and champion innovation;
- And maintain a public list of only active operating funding portals and registrants with a regular check of their operating status combined with a definition of ‘active’ portals (ie., >1 capital raise in the proceeding 12 months).
See select NCFA submissions:
NCFA meeting with OSC - briefing notes on Aug 24, 2017
NCFA submission to Ontario Minister of Finance: Urgent Need for Regulatory Change (report | summary) on Oct 18 2017
NCFA meeting with BCSC - briefing notes on Aug 15, 2017
NCFA Response to ASC Request for comments 45-108 on Sep 9, 2018
Download a PDF Copy of the Submission --> here
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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CONGRATULATIONS TO THE 2020 FINTECH DRAFT PITCHING AND DEMO COMPANY WINNERS! |
