Leader-Post by Bruce Johnstone | July 10, 2013

Saskatchewan is boldly going where no province has gone before by being the first to allow equity crowdfunding - using the Internet to raise startup capital for small businesses - without having to file a prospectus or even register as an issuer with securities regulators.

But the Financial and Consumer Affairs Authority proposal to exempt equity crowdfunding from securities rules would limit fundraising to a maximum of $100,000, no more than twice a year, and limit investors to a maximum investment of $1,000.

"This is a very modest proposal,'' Dean Murrison, director of FCAA's securities division, told a public information session in Regina on Tuesday.

While other jurisdictions are looking at regulating crowdfunding, Saskatchewan is the first member of Canadian Securities Administrators, the 13 provincial and territorial securities regulators, proposing this particular model of regulation, Murrison added.

"There's lots of other work being done on crowdfunding among the Canadian Securities Administrators and we're participating in that ... But we felt that we should move ahead on a startup, small-business kind of exemption," Murrison said, which would allow business ideas to get startup capital without getting bogged down in red tape.

"Of course, we're regulators, so our first mandate is always public protection,'' he added. "But if we can do it in a way that allows business to do their thing, and contribute to the economy and the market and keep it growing, that's the way we want to do it.''

Crowdfunding is growing exponentially around the world, from funding microstartups in the developing world to peer-to-peer lending, in which loans are borrowed and repaid with a small amount of interest. In Canada, crowdfunding is used to pre-sell products and receive donations for small businesses or creative projects. However, some jurisdictions, like the United States, are thinking about equity crowdfunding as a means of raising capital for small businesses using online portals to sell securities, like shares, limited partnership units and promissory notes.

That's where the FCAA proposal comes in.

Dave Wild, CEO of FCAA, said the authority is mandated under the Securities Act to protect consumers, but also to "foster the capital markets."

"We're under no illusions that crowdfunding is going to suddenly result in a large number of issues being highly successful. These are small offerings we're talking about here and there will be a high rate of failure,'' Wild said. "Crowdfunding will encourage entrepreneurialism and encourage investing by those who might not otherwise be drawn to investing.''

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