Equity crowdfunding first launched in Saskatchewan, but with investor risks

Metro Regina | By | December 23, 2013

Saskatchewan equity crowdfunding announcement 300x201 - Equity crowdfunding first launched in Saskatchewan, but with investor risksSaskatchewan has become the first province to green light equity crowdfunding, though the jury is out on whether the new regulations strike the right balance between accessibility and investor protection.

Earlier this month, the Saskatchewan government’s Financial and Consumer Affairs Authority (FCAA) announced the creation of an exemption to provincial regulations that would allow start-up enterprises and small businesses to raise capital through crowdfunding by issuing securities, such as shares.

While the exemption — which lifts some traditional disclosure regulations for securities — provides enticing new opportunities for entrepreneurs, it also presents tangible risks, according to one expert.

Related:  Equity Crowdfunding available in Saskatchewan

“This mechanism is allowing Saskatchewan investors to invest in Saskatchewan start-ups,” said Brian Koscak, a Toronto-based securities lawyer and chairman of the Exempt Market Dealers Association of Canada.

He points out that the exemption applies only to investors and companies based in Saskatchewan, calling it the “democratization of investment and loss.”

Crowdfunding is touted as a steadily growing alternative financing model, in which numerous investors contribute small sums to a project — usually through an online portal such as the popular U.S. website Kickstarter.

Unlike projects on Kickstarter, however, equity crowdfunding investments involve sales of securities — complex and risky financial tools that typically only certified professionals are allowed to sell and issue.

FCAA Summary of comments and responses on Saskatchewan Equity Crowdfunding Exemption

Event Video (Dec 6, 2013):  Saskatchewan approves Equity Crowdfunding Exemption

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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.