Karsten Wenzlaff, Advisor
August 26th, 2025
Karsten Wenzlaff is a Crowdfunding and Fintech Expert from Germany. He is Secretary-General of Digit[...]
CSA Review of EMD Selling Groups Exemption
Capital Raising | Dec 2, 2025
Regulators Launch Consultation to Assess Temporary EMD Selling Groups Exemption
On November 27 2025, Canadian securities regulators released CSA Multilateral Staff Notice 31-367, confirming that the temporary rule under Coordinated Blanket Order 31-930 will end on December 20, 2025 (see release). The consultation remains open until January 26, 2026, which creates a timing gap that matters for exempt market dealers, founders and investors who want clarity on whether a revised model may support stronger capital raising across Canada.
The EMD Selling Groups exemption started in June 2024. It enabled exempt market dealers to join selling groups in prospectus offerings. The policy goal looked straightforward. Most Canadian companies start in the exempt market. Many later raise growth capital under a prospectus. Allowing exempt market dealers to stay involved as companies advance could strengthen continuity, expand distribution and support investor access.
See: How Fintechs Are Unlocking Value in Private Markets 2024
The results did not match that intent:
According to the Staff Notice, only 3 exempt market dealers filed the required notice to participate, and only 2 of those exempt market dealers actually joined selling groups. Each took part in two prospectus offerings. That means the entire pilot produced four transactions nationally. The low participation explains why regulators want to close the temporary rule and collect feedback on the structural issues that affected the outcome.
What EMDs, Founders and Investors Said Through the Pilot
Regulators identified four barriers that influenced participation, according to the Staff Notice.
1. Exempt market dealers cannot access electronic settlement through the Canadian Depository for Securities. Issuers that chose to work with exempt market dealers needed to use paper certificates. This added time and cost to prospectus stage financing.
2. Exempt market dealers cannot advise clients on securities purchased under a prospectus. This restriction makes it difficult for them to support clients after closing.
See: Budget 2025 Accelerates Fintech, AI, and Capital Growth
3. Compensation limits created a barrier. Exempt market dealers faced a scale back on economics when compared with other activities available to them.
4. Issuers and investment dealers were not fully aware that exempt market dealers could participate. Some exempt market dealers reported that investment dealers did not understand the conditions required to include them in selling groups.
Although most issues seem like practical challenges, companies and intermediaries tend to choose the path with the fewest obstacles. Any friction at the distribution or settlement layer reduces interest in a new route, especially if the upside is limited.
Regulators also outlined the questions they want the market to address during the consultation. They want to understand whether the compensation limits reduced interest in the exemption and whether a different structure could support fair incentives. They also want feedback on how the lack of electronic settlement access affects issuer decisions, how the advice restrictions affect client relationships, and whether issuers and investment dealers need clearer guidance on how to include exempt market dealers in selling groups.
Why This Outcome Matters to the Market
Founders want financing routes that feel clear and predictable. Investors value trusted relationships and efficient execution.
Exempt market dealers want a model that supports their clients as they grow, along with fair compensation.
Read: DealMaker Raises $20M to Expand AI Capital Platform
The exemption tried to bridge the exempt market with the prospectus market but with only four completed transactions under the temporary exemption, data suggests that the approach wasn't sustainable for both issues and dealers who want reliable access to distribution during growth stage financing.
For founders, this means they will need to continue to rely on investment dealers when they reach the prospectus stage.
For investors, this means their EMD cannot guide them through a prospectus purchase because the rules doesn't allow exempt market dealers to advise clients on prospectus securities.
Regulators are now looking for feedback that reflects what founders, investors and dealers experience on the front line to better understand incentives, bottlenecks and market behaviour.
Regulators Look for Practical Market Insight
The Ontario Securities Commission recently launched a program offering $30,000 in grant support to academic researchers for new research work on Ontario capital markets. This program encourages research that helps regulators understand how companies raise capital and how the market supports growth. Note, NCFA previously wrote about how wider participation may better unlock the kind of innovative policies required in 2026 and beyond to support a dynamic and competitive capital market while protecting investors.
See: Market Forces Pressuring Fintech Plans For 2026
The combination of the CSA consultation and the OSC research program are signs that regulators want practical input grounded in real activity. The pilot produced limited use, so regulators now want to hear from market participants before they consider any new approach.
Outlook
Canada needs rules that help companies raise growth capital and help investors access opportunities backed by clear standards. The temporary EMD selling group exemption didn't move the needle enough in the practical world to support extension.
The CSA consultation now gives the market a chance to highlight what helps and what slows down capital formation. Founders, investors and dealers have an opportunity to provide inputs that supports growth and strengthens Canada’s competitiveness in capital markets innovation. Submit your consultation comments to the CSA here before January 26, 2026.
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, artificial intelligence, 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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