Ontario minister Duguid indicating support for equity-based crowdfunding

Financial Post  Christine Dobby | Nov 29, 2012 11:34 AM ET | Last Updated: Nov 29, 2012 12:55 PM ET

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The Ontario government appears to be throwing its support behind moves to loosen securities laws to allow equity-based crowdfunding.

At a conference in Toronto Thursday morning, Brad Duguid, minister of economic development and innovation, spoke about the potential benefits that crowdfunding provides for entrepreneurs and said once the Ontario Securities Commission completes a review, the provincial government would look at ways to move forward with changes.

The minister told the audience at the Technicity conference that the changes could even be in place before changes to U.S. laws under the JOBS Act come into force.

“With the U.S. heading in this direction, it’s really important that Ontario keep pace if not even try to get out in front if we can do that in a way that ensures protection for consumers and investors,” Mr. Duguid said in an interview.

The JOBS legislation, passed in the spring of this year, is intended to permit non-accredited or non-sophisticated investors to buy small equity stakes in companies without the businesses going through an IPO process and preparing a costly prospectus.

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The U.S. Securities and Exchange Commission is currently undertaking a rulemaking review, which was initially expected to be completed around the end of the year, but many now expect it will not be wrapped up until mid-2013.

The OSC is undertaking its own review of prospects exemptions that allow for investment absent a prospectus. In June it announced plans to broaden that review and Mr. Duguid said he understands a public consultation will take place in early 2013.

The securities regulator is an independent body and sets its own timing, Mr. Duguid said, but he noted that the government has made clear its interest in moving quickly to pursue equity-based crowdfunding — if appropriate.

“They [the OSC] certainly are aware that the premier and government wants to ensure that should we recommend that we move forward with this tool, that we do it as soon as possible to ensure that we are not disadvantaged if the US are to move ahead of us,” he said.

The Technicity conference brought together advocates of equity based crowdfunding through online platforms.

Proponents say it gives entrepreneurs access to capital they otherwise couldn’t find and lets regular investors support businesses they care about.

However, critics say there is a potential for fraud and adequate regulations must be in place to protect investors.

The Canadian Securities Association, the umbrella organization of the provinces’ securities regulators, has indicated it is also looking at the issue but has not yet determined whether to recommend changes.

Source:  here