Decentralized Venture Ecosystem

March 1, 2019: NCFA Submission to the Ontario Securities Commission on Regulatory Burden

NCFA Canada | Burden Reduction Committee | March 1, 2019

burden reduction - March 1, 2019:  NCFA Submission to the Ontario Securities Commission on Regulatory BurdenExecutive Summary

In response to the Ontario Securities Commission’s (OSC’s) January 14, 2019 request for comments, this submission responds to the eight questions set out in the OSC’s Staff Notice 11-784. This submission draws heavily on, and also updates, the Association’s earlier submission to the OSC dated August 24, 2017 (see Appendix), which primarily focused on the crowdfunding requirements in Ontario.

The National Crowdfunding and Fintech Association of Canada (the Association) represents over 2,000 fintech SMEs and individual members that support financial and capital market innovation, small businesses and technology. We are pleased that the Ontario government is undertaking this important regulatory burden reduction initiative to the benefit of all Ontarians.

The Association has consulted a number of diverse crowdfunding and fintech stakeholders – including exempt market dealers, industry experts, securities lawyers, regulators and government agencies and is proposing several recommendations to reduce unjustifiable burdens placed on Ontario’s businesses.

The Association recommends that the province undertake the following:

  • The OSC conduct a review and publish a report evaluating the effectiveness of Ontario’s crowdfunding regulations (45-108) compared to other jurisdictions in Canada and international competitors such as the UK, US and Australia, including a comparison of the relative cost of capital;
  • The OSC continue its recently announced work to harmonize the crowdfunding regime across Canada (CSA Staff Notice 45-324) but do so with the goal of reducing unjustified regulatory burden and establishing harmonized regulation that make sense for the sector. In particular, all jurisdictions should review B.C.’s crowdfunding regime and consider either adopting a similar approach in harmonization;
  • Modify existing requirements so that they are principles based – detailed or prescriptive controls should only be imposed when clearly justified (ie. controls that can be quantified) and harmonized;
  • Implement specific burden reduction amendments to crowdfunding regulations:
    − Increase the 12 month issuer cap to $5 million or higher (from $1.5 million);
    − Increase the 12 month investor caps to $10k (from $2.5k) and allow accredited investors to fully participate;
    − Allow advertising and general solicitation on social media for all crowdfunding;
    − Eliminate requirements for financial statements unless raising more than $1.5 million; and
    − Allow fintech solution to streamline KYC and suitability tests.

See:  NCFA: Canada Needs a Harmonized Securities Environment as Current Provincial Approach is a Fintech Innovation Killer

Implementing these recommendations will help drive entrepreneurship, innovation and job growth.

Benefits to Ontario include:

  • Increased capital investment in the province and increased economic growth;
  • Increased investment options for investors that support small businesses across all of Ontario;
  • Crowdfunding sources remain in Canada;
  • More capital and improved access to capital specifically for small businesses, rural businesses, economically-challenged sectors, and underserviced groups (ie. women or Indigenous business owners);
  • Encourages liquidity and transparency in the markets;
  • Improved probability of retaining high growth companies in Ontario; and
  • Accelerated commercialization of new products and services.

Crowdfunding drives innovation, economic activity and job growth. It fills a critical early stage funding gap (commonly referred to as the ‘valley of death’), enables more productive investment in venture markets and strengthens early stage capital markets. Crowdlending also provides support to more mature companies looking to access capital that may fall outside the parameters of bank lending.

Background and Context

Contrary to the intent of the crowdfunding exemption, Ontario’s crowdfunding requirements hinder access to capital for SMEs across a multitude of sectors. These requirements have also restricted innovative opportunities for retail investors and our members feel the impact of this directly. Ontario’s economic growth is being hindered by regulation like the crowdfunding requirements that fails to promote economic growth. The potential of opening up regulation is significant increase in job creation and economic development. For example, Ontario’s 417,000 small businesses would benefit from the increased access to capital that crowdlending offers and the effects would be a strong boost in job creation throughout the province.

Canada has fallen behind international competitors like the U.K. and the U.S. Crowdfunding platforms now represent the largest investments at the seed stage in the U.K. and peer-to-peer platforms now represent 15% of all new bank lending to small businesses.

See: 

Ontario’s Fintech startups, small business innovators and entrepreneurs operate in a highly prescriptive, complex and costly regulatory environment:

“The Crowdfunding Exemption introduced by the [OSC] in January 2016 turned out to be much too onerous for young companies… Ontarians are locked out of equity crowdfunding and Canadian companies are restricted from accessing capital. … Unfortunately, we had to disappoint over 100 start-ups in Canada that wanted to raise capital from their supporters in Ontario.” – FrontFundr, Ontario Exempt Market Dealer

“It's extremely complex and it can be very discouraging for a lot of small entrepreneurs. There are numerous examples where in Ontario we [are] really pushing talent away or setting them up for failure because of the red tape, and the burden is huge. It is hard [enough] to start a business. You know the wages are very expensive, the rents... The regulation and the burden [is] just the complete killer.” – Anonymous NCFA member

“As a small firm, we have very tight budgets. Our compliance team has asked that we dig up very detailed and ‘historic’ information on emails, social media ads, and related campaigns. We had to devote 2 full time individuals over several months. Check-ins and site visits to confirm the material presented in the compliance report and to assist registrants in fulfilling their obligations would be far more productive. The former (exhaustive reviews) take an incredible amount of resources for both regulator and registrant and are not cost-effective.” – Anonymous NCFA member

Without a streamlined, flexible, nimble, and principles-based regulatory system – one that allows new rules to be formulated, while expelling old, outdated rules – Ontario’s regulatory climate will continue to stifle innovation and drive business costs up and productivity down. Ontario’s economy, businesses and consumers at all levels suffer, however, small businesses, innovators and entrepreneurs are the hardest hit.

“Ontario’s crowdfunding requirements have choked off access to capital for SME's across a multitude of sectors – they have also shut out retail investor opportunities. Our members are completely stifled by OSC requirements and this is contributing significantly to Ontario's weak economic performance. “- Anonymous NCFA member

See:  NCFA Submission to Ontario Ministry of Finance: Urgent Need for Regulatory Change

On behalf of the burden reduction committee at NCFA, we look forward to contributing ongoing input into Ontario’s burden reduction initiatives. Please contact us at any time to discuss further.

 

Sincerely,

 

Craig Asano
CEO & Founder
NCFA
casano@ncfacanada.org
(416) 618-0254

 

Download the full submission (34 page PDF) -> here


NCFA Jan 2018 resize - March 1, 2019:  NCFA Submission to the Ontario Securities Commission on Regulatory Burden 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

Latest news - March 1, 2019:  NCFA Submission to the Ontario Securities Commission on Regulatory BurdenFF Logo 400 v3 - March 1, 2019:  NCFA Submission to the Ontario Securities Commission on Regulatory Burdencommunity social impact - March 1, 2019:  NCFA Submission to the Ontario Securities Commission on Regulatory Burden

Support NCFA by Following us on Twitter!






NCFA Sign up for our newsletter - March 1, 2019:  NCFA Submission to the Ontario Securities Commission on Regulatory Burden



For more information about FFCON21: BREAKING BARRIERS, on-demand videos and ways to participate




NCFA Canada | Jan 21, 2022 JOIN US ON A STORYTELLING JOURNEY EVERY FRIDAY. EP56: How We Raised $426 million Using Rewards Crowdfunding Featured Guest: ZACH SMITH, CEO and Co-Founder, Funded Today (LinkedIn) Zach Smith is a serial entrepreneur having never had a "real" job his entire life. He's always starting, selling, running, and managing businesses. Mr. Smith loves helping others turn their dreams, ideas, and inspirations into successful companies. This passion led to his creation of Funded Today, LLC, the world’s most successful crowdfunding firm. Funded Today has now cumulatively raised over $426 million and counting for 4,000+ crowdfunding campaigns across the world and in 2018 was the 27th fastest-growing-privately held company in the United States on the prestigious Inc. 5000 list, and #2 in Utah. Chances are, if you've seen a successful campaign on Kickstarter or IndieGoGo, Zach Smith and Funded Today have been the driving factor behind its success! Mr. Smith graduated Summa Cum Laude as the valedictorian from Weber State University's Goddard School of Business and Economics, with a business degree specializing in accounting. He is fluent in Mandarin Chinese and has been featured in numerous publications including Mixergy, The Wall Street Journal, USA Today, Entrepreneur, ...
Read More
NCFA FF EP56 Zach Smith Funded Today  - March 1, 2019:  NCFA Submission to the Ontario Securities Commission on Regulatory Burden
Niche Gamer | Michael Valverde | January 18 Seven recent patent filings suggest retail giant Walmart is embracing crypto, NFTs, and more as they’re entering the Metaverse with a new business venture that incorporates VR gaming, cryptocurrency, and NFTs. These trademarks were filed to the US Patent and Trademark Office on December 30, 2021, outlining several potential applications that Walmart can pursue that incorporates the growing (and controversial) world of Web 3.0. One patent describes “downloadable e-commerce software” that would allow users to “perform electronic business transactions” by providing them with a “virtual marketplace” that accepts “digital currency, crypto currency, and virtual currency.” See:  Walmart to launch fintech startup with partner Ribbit Capital An example of this potential marketplace went viral earlier this month, when a video created by Mutual Mobile for SXSW 2017 resurfaced on Twitter. This video showcased a tech demo of a virtual Walmart shopping experience using Oculus virtual reality technology. Instead of the traditional e-commerce experience that involves clicking on a picture of an object to add it to a cart, this video shows how the user can manipulate specific products as physics objects placed inside a virtual representation of a real shopping cart, with FMV-style ...
Read More
Walmart files crypto and NFT patents - March 1, 2019:  NCFA Submission to the Ontario Securities Commission on Regulatory Burden
Financial Health Network | Jan 20, 2022 Why Invest in Employee Financial Health? Now more than ever, employees at all income levels are struggling with their finances, especially those with low to moderate incomes. When people worry about their finances, they struggle to stay focused and productive at work. What’s more, employees have come to expect that their employers will provide wages and benefits that support their financial health. See:  Financial Health Network Report: Financial Data – The Consumer Perspective Investing in the financial health of your workforce can create a win-win for your employees and your business. But beyond being a smart thing to do, many companies recognize that investing in employee wellbeing is the right thing to do. Caring for the financial health of your workforce shows that you value your employees and the contributions they make to your company’s success. Diagnose Needs Employee needs are diverse. One-size-fits-all financial health solutions can result in low uptake and limited impact, because they don’t address the needs of the employees who could benefit most. Before designing solutions, take the time to understand your employees’ needs and prioritize the most acute challenges. Identify Solutions To find the right solutions for your ...
Read More
financial health network - March 1, 2019:  NCFA Submission to the Ontario Securities Commission on Regulatory Burden
The Hub | Derrick Hunter | Jan 19, 2022 78 percent of the Canadian workforce are either entrepreneurs or are employed in businesses that at one time were created by entrepreneurs A core objective of every federal, provincial, and local government is to promote “economic development”, which is understood as the improvement of our standard of living through the creation of jobs, the support of innovation, the creation of wealth, and an overall better quality of life. Economic growth is more or less table stakes for officeholders who hope to be re-elected since a shrinking economy is never good news for the incumbent. Consequently, it is hardly surprising that jurisdictions will compete ferociously to attract fast-growing companies. Just witness the frenzy over the announcement by Amazon in 2018 of their intention to create a second headquarters. Dozens of cities across the U.S. and Canada offered extraordinary incentives in the attempt to win the prize. Atlanta offered to build an exclusive airport lounge. Boston offered zero-interest loans to Amazon employees. Columbus offered to make exceptional efforts to reduce their “unacceptable” murder rate. All of this on top of billions of dollars of incentives, subsidies, and tax reductions that were merely the ...
Read More
entrepreneurship core driver of economic growth - March 1, 2019:  NCFA Submission to the Ontario Securities Commission on Regulatory Burden
CloudTree Ventures | Winston Ma | Jan 19, 2022 Today, China and the United States are competing and growing their technological capabilities in a wide array of sectors. The cutting-edge area of America and China’s technological war that’s been heating up recently is around who will dominate the blockchain and cryptocurrency industry. Although China has cracked down on cryptocurrencies, shutting down all domestic crypto exchanges and banning all ICOs, blockchain technology itself is recognized as a revolutionary development by the government. In a speech October 2019 speech, Chinese President Xi Jinping declared blockchain would play “an important role in the next round of technological innovation and industrial transformation.” That marked the first major world leader to issue such a strong endorsement of the widely hyped – but still unproven – distributed ledger technology (DLT). (By contrast, most governments in the West have been far more cautious.) See:  The Good, the Bad and the Ugly of Central Bank Digital Coins (CBDCs) Calling for blockchain to become a focus of national innovation, President Xi’s speech detailed the ways the Chinese government would support blockchain research, development, and standardization. China’s leadership position in the global competition of central bank digital currency (CBDC) is ...
Read More
E CNY Cross border global payments - March 1, 2019:  NCFA Submission to the Ontario Securities Commission on Regulatory Burden
GBBC | Jan 19, 2022 Day 1: Jan 18 See:  Can Blockchain Solutions Unlock Capital to Fix Our Planet? Day 2: Jan 19 Download the 2 day virtual agenda --> 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 ...
Read More
GBBC Blockchain Central Davos Jan 18 19 - March 1, 2019:  NCFA Submission to the Ontario Securities Commission on Regulatory Burden
CSA Release | Jan 19, 2022 Toronto – The Canadian Securities Administrators (CSA) today published guidance for investment funds on their disclosure practices that relate to environmental, social and governance (ESG) considerations, particularly funds whose investment objectives reference ESG factors and other funds that use ESG strategies (ESG-Related Funds). The guidance is based on existing regulatory requirements and addresses areas of disclosure, including investment objectives, fund names, investment strategies, risk disclosure, continuous disclosure and sales communications. See:  New SEC task force will scrutinize ESG and climate disclosures and marketing As the investment fund industry creates new funds and incorporates ESG considerations into existing funds to meet demand, there is an increased potential for “greenwashing” – where a fund’s disclosure or marketing intentionally or inadvertently misleads investors about the ESG-related aspects of the fund. “Interest in ESG investing is on the rise and this enhanced and practical guidance will play an important role in helping investors make informed decisions about ESG products, as well as preventing potential greenwashing,” said Louis Morisset, CSA Chair and President and CEO of the Autorité des marchés financiers. This guidance is intended to help investment funds and their fund managers enhance the ESG-related aspects of the funds’ regulatory ...
Read More
ESG fund disclosure guidance - March 1, 2019:  NCFA Submission to the Ontario Securities Commission on Regulatory Burden
UK Law Society | Jan 11, 2022 We’ve published the second edition of our blockchain report, in collaboration with the Tech London Advocates (TLA) Blockchain Legal and Regulatory Group. Who wrote the report? The TLA Blockchain Legal and Regulatory Group put together the second edition of the blockchain legal and regulatory guidance. Read the first edition TLA's dedicated blockchain working group was founded in 2018 and serves as a hub for multi-disciplinary DLT experts. For the 2022 guidance, we’ve heard from experts including the law commissioner for commercial and common law, Professor Sarah Green, and Alessandro Palombo, CEO of Jur. See:  Blockchain Vulnerabilities, Forensics And Legal Challenges A full list of experts who have addressed and fed into the group’s work is set out at annex two of the report. What’s in the report? The guidance covers a range of key issues for legal practitioners to be aware of when advising on DLT-related matters. The report is divided into two parts: Continue to the full article --> here Download the 236 page PDF report --> 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 ...
Read More
blockchain legal and regulatory guidance 1 - March 1, 2019:  NCFA Submission to the Ontario Securities Commission on Regulatory Burden
SEC | Jan 19, 2022 Navigating Your Capital Raising Options When raising capital, a business may not offer or sell securities unless the offering has been registered with the SEC or falls within an exemption from registration. Each exemption has specific requirements that a company must meet. See:  The Real Story of Access to Capital This interactive tool can help you navigate the many regulatory pathways to raise capital, based on the criteria that matter most to you. While this tool does not provide legal advice, it can help you better understand your options so that you make informed decisions. Let’s get started! New SEC funding tool to explore options --> 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 ...
Read More
options to raise capital in the U.S - March 1, 2019:  NCFA Submission to the Ontario Securities Commission on Regulatory Burden
CBC | Cassie Williams | Jan 18, 2022 Gerald Cotten died suddenly in 2018 and took keys to $250 million in crypto assets to his grave Robertson isn't under investigation and has never faced criminal charges. After Cotten's death, she agreed to forfeit $12 million in assets that included vehicles and real estate. She was allowed to keep $90,000 in cash, $20,000 in retirement savings, a 2015 Jeep Cherokee, $15,000 in furniture and some jewelry, including her wedding band. Cotten ran Quadriga like a Ponzi scheme Investigative journalists Amy Castor and Takara Small have spent years following and reporting on the Quadriga scandal.   Castor said Cotten operated Quadriga like a Ponzi scheme. "Whenever people put their money into the exchange, he sort of used it as his personal slush fund," she said. Small said people were bringing duffel bags of cash to the home Cotten and Robertson shared. She wonders why Robertson didn't think to question what was going on. See:  QuadrigaCX: A Review by Staff of the Ontario Securities Commission Robertson said she trusted Cotten, and any questions were explained away because banks were very "anti-bitcoin" and there were problems exchanging cryptocurrency for cash through traditional means. "It never ...
Read More
QuadricaCX gerry cotton - March 1, 2019:  NCFA Submission to the Ontario Securities Commission on Regulatory Burden

 

Leave a Reply

Your email address will not be published. Required fields are marked *