Global fintech and funding innovation 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




BDC | Release | Jun 20, 2024 BDC Announces $250 Million Investment to Empower Diverse Entrepreneurs in Canada The Business Development Bank of Canada (BDC) has reaffirmed its commitment to fostering inclusive entrepreneurship by announcing a $250 million investment to help majority-owned Indigenous, Black, and Women-led firms to help overcome long-standing obstacles to work towards establishing a more diversified and dynamic entrepreneurial ecosystem in Canada. How Will $250 Million be Allocated? Acknowledging the funding gap that new diverse firms are faced with, BDC has launched a $50 million program to promote early-stage enterprises run by women, Indigenous, and Black entrepreneurs. This program offers financial aid as well as key training to businesses with revenues under $3 million, assisting them in overcoming challenging entry barriers and building trust in mainstream financial services. See:  Trends in Reg CF for Minority and Women Founders BDC Capital, the bank's investment section, has introduced two new $100 million platforms aimed at Indigenous and Black-led firms. These efforts are intended to supplement the existing $500 million Thrive Platform, which helps Indigenous and Black women entrepreneurs. By collaborating closely with community leaders, BDC hopes to build supportive and effective investment environments that are suited to the requirements ...
Freepik diverse entrepreneurs - March 1, 2019:  NCFA Submission to the Ontario Securities Commission on Regulatory Burden
Capital Raising | Release | Jun 20, 2024 New Time-Limited Exemption Allows EMDs to Sell Prospectus Offerings for Growth Capital The Ontario Securities Commission (OSC), Autorité des marchés financiers (AMF), British Columbia Securities Commission (BCSC), Financial and Consumer Affairs Authority of Saskatchewan (FCAA), Alberta Securities Commission (ASC), and Nova Scotia Securities Commission (NSSC) are allowing exempt market dealers (EMDs) to participate as selling group members in prospectus offerings, increasing their potential to assist business growth. See:  Final Report: Ontario Capital Markets Modernization Committee Recommendations Historically, EMDs have helped start-ups and small to medium-sized firms access finance by distributing securities under prospectus exemptions. However, as these companies scale they tend to use full prospectus offerings, which EMD participation has been limited due to regulatory restrictions. The recently announced time-limited exception is intended to address these hurdles. The exemption allows EMDs to join as selling group members in prospectus offerings, offering an additional route for capital acquisition for growing enterprises. Investment dealers will continue to play key roles in these offerings, including underwriting. Grant Vingoe, CEO of the OSC: “Creating favorable conditions for business success is pivotal to our economic prosperity. Today's measures underscore the commitment of securities regulators to foster the ...
Freepik jcomp raising capital - March 1, 2019:  NCFA Submission to the Ontario Securities Commission on Regulatory Burden
Jun 19, 2024 Recent advances in technology have transformed the way we access and assimilate information, enabling us to make data-driven decisions that allow for greater predictability and precision. From artificial intelligence (AI) algorithms that can analyze large data sets on customer experience to machine learning models that can forecast market trends, the insights and clarity gleaned from these tools have revolutionized the business landscape. Many of these technologies can also be used in the investment arena to help investors manage their risk and optimize their returns. In this article, we will take a closer look at some of the ways technology can be leveraged by investors to inform and execute their investment strategies. Robo-Advisers These digital platforms can provide automated investment advice and services to investors without the need for financial advisers,  investment managers, or any other type of human intervention. Robo-advisers use algorithms to gather information on investors’ risk tolerance, finances, and investment goals through an online questionnaire. With this information, robo-advisers automatically create and invest funds into a portfolio that contains assets tailored to the individual's investment profile. Beyond portfolio management, robo-advisers can also monitor and automatically rebalance portfolios to ensure they maintain the allocated level of ...
Unsplash Joshua Mayo Online investing stock market - March 1, 2019:  NCFA Submission to the Ontario Securities Commission on Regulatory Burden
M&A | Release | Jun 19, 2024 Nuvei Shareholders Greenlight $6.3 Billion Buyout by Advent International Nuvei Corp., a major payment technology corporation based in Montreal, has announced that its shareholders have decisively approved a buyout proposal from American private equity firm Advent International. In a recent vote, 99.24% of Nuvei shareholders approved the takeover, which pays $34 per share in cash for a valuation of $6.3 billion. This high approval demonstrates investor confidence in the transaction and its ability to strengthen the company's strategic position. This transaction will take Nuvei private. See:  How AI is Shaping the Future of Financial Services in Canada Advent International proposed the buyout in partnership with existing owners Novacap, CDPQ, and Nuvei's chair and CEO Philip Fayer, which was first revealed in March 2024. Under the terms of the agreement, Philip Fayer will remain CEO and chair, to ensure continuity of management. The corporation will also keep its headquarters in Montreal. Background and Next Steps Nuvei went public in 2020, raising $833 million and breaking the record for the largest tech IPO on the Toronto Stock Exchange. The company's innovative payment options and rapid growth sparked widespread interest, including a large investment from Canadian ...
Freepik jcomp deal - March 1, 2019:  NCFA Submission to the Ontario Securities Commission on Regulatory Burden
Release | Jun 19, 2024 FundMore and Equitable Bank Announce Partnership to Improve Mortgage Lending FundMore, an artificial intelligence-powered mortgage underwriting platform, has scored a partnership with Equitable Bank, Canada's seventh-largest independent Schedule I challenger bank. This collaboration intends to streamline and improve the mortgage process, making it more efficient and accessible to borrowers across Canada. The major purpose of this collaboration is to use FundMore's innovative technology to improve Equitable Bank's mortgage operations. FundMore's platform uses artificial intelligence and machine learning to automate and improve mortgage underwriting accuracy, saving time and effort on mortgage approvals. This integration is expected to benefit both borrowers and lenders by reducing response times and improving risk evaluations. See:  FundMore x Senso AI Launch Solution to Transform Lending Quicker decision-making will also improve the overall customer experience while reducing the paperwork often involved with mortgage applications. Initially, the new services will be provided in major markets such as British Columbia, Alberta, and Ontario. There are intentions to expand further depending on the success of the initial rollout and market demand. This strategic expansion aims to meet the needs of various customer groups, including owner-occupied purchases, refinances, and rental property investments. Mahima Poddar, SVP and ...
Freepik rawpixel.com real estate - March 1, 2019:  NCFA Submission to the Ontario Securities Commission on Regulatory Burden
Enforcement | Jun 19, 2024 SEC Ends Investigation into Consensys and Ethereum.  Implications for the Crypto Industry On Jun 18, 2024, Consensys announced that the United States Securities and Exchange Commission (SEC) has dropped its investigation into Ethereum 2.0 and will not take legal action over Ethereum. This is big win for the Ethereum community and will have implications for the future of cryptocurrency regulation in the United States. Background In 2018, the SEC when Jay Clayton was Chair and in public speeches SEC Director Bill Hinman expressed that Ether was not a security.  However, when Gary Gensler, the current SEC Chair, took over, the regulatory attitude became clear as mud.  In 2023, the SEC began looking into Ethereum 2.0, implying that it could be a security. Consensys received many subpoenas and a formal order of investigation on March 28, 2023. Consensys replied by launching a lawsuit in April 2024, arguing that Ethereum is a commodity and outside the SEC's authority.​ SEC's Decision On June 18, 2024, the SEC issued a letter to Consensys stating that it would not take enforcement action against Consensys or Ethereum 2.0. The letter officially closes the SEC's inquiry of Consensys and Ethereum 2.0, noting ...
SEC letter in the matter of Ethereum 2.0 - March 1, 2019:  NCFA Submission to the Ontario Securities Commission on Regulatory Burden
Jun 19, 2024 The quest for safer roads is a shared concern among urban planners, cyclists, and policymakers. The popularity of cycling as a mode of transportation, sport, and leisure activity has been constantly rising in the past. This has made it more critical than ever to ensure the safety of cyclists. This article explores the rise in cycling accidents and outlines strategies cities can implement to protect cyclists and promote a bike-friendly environment. The Rising Accidents of Cyclists Cycling has surged in popularity recently, driven by its health benefits, environmental advantages, and cost-effectiveness. A report from Statista shows that around 54.7 million Americans participated in cycling, an increase from 51.4 million in 2021. However, this increase in cycling activity has coincided with a troubling rise in accidents involving cyclists. The National Highway Traffic Safety Administration (NHTSA) reports that in the United States alone, there were 966 pedal cyclist fatalities in 2021. This is the highest number of fatalities for these commuters since 1975, when it was above 1,000. Several factors, such as distracted driving, inadequate infrastructure, and the lack of dedicated cycling lanes, are the primary culprits for these crashes. Additionally, the coexistence of motor vehicles and bicycles on roads designed primarily ...
Freepik cycling in the city - March 1, 2019:  NCFA Submission to the Ontario Securities Commission on Regulatory Burden
Report | Jun 18, 2024 Summary of 2024 Risk Survey for Financial Institutions and Insights for Fintechs The Bank Director's 2024 Risk Survey highlights numerous rising risks and issues that banks and financial institutions are facing as a result of developing regulatory and economic situations. Below are some important areas of concern applicable to the financial sector for review 1. Regulatory and Compliance Risks Increased regulatory requirements are a major worry for financial organizations. Over 75% of executives are concerned about regulatory risks, compared to 66% last year. New restrictions and monitoring, like the Community Reinvestment Act, have significantly contributed to this worry. 2. Margin Pressures and Profitability Net interest margins (NIMs) have tightened dramatically, with 78% of bank leaders reporting lower profits, up from 26% the previous year. Rising funding costs are creating profitability issues, particularly for community banks. NIMs decreased by 10 basis points to 3.17%, putting pressure on profitability. The ratio of unprofitable community banks increased to 5.2% at the end of 2023, up from 3.5% the previous year. 3. Deposit Retention and Liquidity Management Rising interest rates have caused some deposit losses, with 59% of banks reporting low to moderate affects on their funding base. Banks ...
2024 Risk Survey Bank Director report - March 1, 2019:  NCFA Submission to the Ontario Securities Commission on Regulatory Burden
Payments Regulation | Jun 18, 2024 The Bank of Canada has announced new supervisory policies around enforcement On June 17, 2024, the Bank of Canada implemented various new regulatory measures around enforcement aimed at improving oversight of payment service companies. See:  BoC Speech: Essence of the New Retail Payment Activities Act These policies centre on: Administrative Monetary sanctions (AMPs): Implementing new penalties for noncompliance. Enforcement Process and instruments: Streamlining enforcement procedures and instruments. Public Notice of Decisions: Developing guidelines for providing public notices of enforcement actions. Governor's Review: Defining the process for examining the Governor's decisions. Executive Roles: Clarifying the roles and responsibilities of the Executive Director and the Managing Director. Significant Adverse Impact: Managing problems with considerable negative consequences. They also updated their Glossary of Terms about retail payment supervision. Resource:  BoC Update for PSPs: New Registration Guide and Supervisory Policies Available Review this comprehensive page hosted by the Bank of Canada around Retail Payments Supervision - Policies and Guidelines. Conclusion The introduction of these policies comes at an important time, as digital payments continue to expand fast. NCFA Canada emphasizes the importance of staying informed to ensure compliance in order to maintain the payment ecosystem's integrity. The National ...
Freepik payments - March 1, 2019:  NCFA Submission to the Ontario Securities Commission on Regulatory Burden
Jun 18, 2024 Many businesses in the sports betting industry compete for customers. Today, user experience is seen as crucial because it differentiates one company from another and also spurs expansion. Good odds and a wide range of bets are not sufficient; businesses must ensure that customers have an easy, enjoyable, and trustworthy betting experience to succeed in this dynamic industry. The Essence of User Experience in Sports Betting User experience encompasses every interaction a bettor has with a sports betting platform, from the moment they land on the website or app to the completion of a bet and beyond. It includes the design and functionality of the platform, ease of navigation, responsiveness across devices, clarity in presenting information, and the overall satisfaction derived from using the service. An enhanced UX leads to higher customer satisfaction and has a positive impact on important indicators like customer acquisition, retention, and lifetime value. That’s why companies like Altenar b2b igaming provider pay attention to the user experience in their sports betting platforms, ensuring intuitive layouts that make it easy for bettors to find relevant information and place bets quickly. Driving Growth Through Enhanced UX Acquisition of New Customers: Intuitive Design: A user-friendly ...
Freepik krakenimages.com sports betting soccer - 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 *

14 − eleven =