Request for comments (until June 18, 2014): CSA Equity Crowdfunding (Draft Regulation 45-108)


CSA | Participating Jurisdictions | March 20, 2014

Feedback please
Note: if you would like to submit your comments to be aggregated with NCFA Canada's submission please email to

On March 20, 2014, the Autorité des marchés financiers (AMF) of Quebec, the Financial and Consumer Affairs Authority of Saskatchewan (FCAA), Financial and Consumer Services Commission of New Brunswick (FCNB), the Manitoba Securities Commission (MSC) and the Nova Scotia Securities Commission (NSSC) (collectively, the Participating Jurisdictions) are publishing for a 90-day comment period:

• The Integrated Crowdfunding Prospectus Exemption and Crowdfunding Portal Requirements (the Crowdfunding Exemption); and
• The Start-Up Crowdfunding Prospectus and Registration Exemption (the Start-Up Exemption)

It is intended that both proposed exemptions will coexist as they target issuers at different stages of development. To facilitate harmonization, staff of the Participating Jurisdictions and the Ontario Securities Commission (OSC) have worked closely and coordinated their efforts in developing proposals relating to the Crowdfunding Exemption. The OSC is also concurrently publishing materials for comment containing prospectus and registration exemptions substantially similar to the Crowdfunding Exemption under a separate Ontario local notice.


The British Columbia Securities Commission (BCSC) is also concurrently publishing a local notice soliciting comments on the Start-Up Exemption. Although the Alberta Securities Commission (ASC) is not publishing the Proposed Exemptions for comments, it will be considering the public comments in respect of them.

Download Overview of Crowdfunding Exemptions


Questions on proposed Crowdfunding Exemption and Start-Up Exemption

The participating jurisdictions in the CSA would appreciate feedback on the proposed Crowdfunding Exemption and Crowdfunding Portal Requirements generally, as well as on the following questions:

Proposed Crowdfunding Exemption

Issuer qualification criteria

1) Should the availability of the Crowdfunding Exemption be restricted to non-reporting issuers?

2) Is the proposed exclusion of real estate issuers that are not reporting issuers appropriate?

3) The Crowdfunding Exemption would require that a majority of the issuer's directors be resident in Canada. One of the key objectives of our crowdfunding initiative is to facilitate capital raising for Canadian issuers. We also think this requirement would reduce the risk to investors. Would this requirement be appropriate and consistent with these objectives?

Offering parameters

4) The Crowdfunding Exemption would impose a $1.5 million limit on the amount that can be raised under the exemption by the issuer, an affiliate of the issuer, and an issuer engaged in a common enterprise with the issuer or with an affiliate of the issuer, during the period commencing 12 months prior to the issuer’s current offering. Is $1.5 million an appropriate limit? Should amounts raised by an affiliate of the issuer or an issuer engaged in a common enterprise with the issuer or with an affiliate of the issuer be subject to the limit? Is the 12- month period prior to the issuer’s current offering an appropriate period of time to which the limit should apply?

5) Should an issuer be able to extend the length of time a distribution could remain open if subscriptions have not been received for the minimum offering? If so, should this be tied to a minimum percentage of the target offering being achieved?

Restrictions on solicitation and advertising

6) Are the proposed restrictions on general solicitation and advertising appropriate?

Investment limits

7) The Crowdfunding Exemption would prohibit an investor from investing more than $2,500 in a single investment under the exemption, and more than $10,000 in total under the exemption in a calendar year. An accredited investor can invest an unlimited amount in an issuer under the AI Exemption. Should there be separate investment limits for accredited investors who invest through the portal?

Statutory or contractual rights in the event of a misrepresentation

8) The Crowdfunding Exemption would require that, if a comparable right were not provided by the securities legislation of the jurisdiction in which the investor resides, the issuer must provide the investor with a contractual right of action for rescission or damages if there is a misrepresentation in any written or other materials made available to the investor (including video). Is this the appropriate standard of liability? What impact would this standard of liability have on the length and complexity of offering documents?

Provision of ongoing disclosure

9) How should the disclosure documents best be made accessible to investors? To whom should the documents be made accessible?

10) Would it be appropriate to require that non-reporting issuers provide financial statements that are either audited or reviewed by an independent public accounting firm? Are financial statements without this level of assurance adequate for investors? Would an audit or review be too costly for non-reporting issuers?

11) The proposed financial threshold to determine whether financial statements are required to be audited is based on the amount of capital raised by the issuer and the amount it has expended. Are these appropriate parameters on which to base the financial reporting requirements? Is the dollar amount specified for each parameter appropriate?


12) Are there other requirements that should be imposed to protect investors?

Crowdfunding Portal Requirements

General registrant obligations

13) The Crowdfunding Portal Requirements provide that portals will be subject to a minimum net capital requirement of $50,000 and a fidelity bond insurance of at least $50,000. The fidelity bond is intended to protect against the loss of investor funds if, for example, a portal or any of its officers or directors breach the prohibitions on holding, managing, possessing or otherwise handling investor funds or securities. Are these proposed insurance and minimum net capital amounts appropriate?

Additional portal obligations

14) Do you think an international background check should be required to be performed by the portal on issuers, directors, executive officers, promoters and control persons to verify the qualifications, reputation and track record of the parties involved in the offering?

Prohibited activities

15) The Crowdfunding Portal Requirements would allow portal fees to be paid in securities of the issuer so long as the portal’s investment in the issuer does not exceed 10%. Is the investment threshold appropriate? In light of the potential conflicts of interest from the portal’s ownership of an issuer, should portals be prohibited from receiving fees in the form of securities?

16) The Crowdfunding Portal Requirements restricts portals from holding, handling or accessing client funds. Is this requirement appropriate? How will this impact the portal’s business operations? Should alternatives be considered?


17) Are there other requirements that should be imposed on portals to protect the interests of investors?

18) Will the regulatory framework applicable to portals permit a portal to appropriately carry on business?


Proposed Start-Up Exemption

We would appreciate feedback on the proposed Start-Up Exemption and Start-Up Portal Requirements generally, as well as on the following questions:

19) Considering that the Start-Up Exemption will be substantially harmonized amongst the Participating Jurisdictions, it is our intention to allow a portal established in one Participating Jurisdiction to post offerings from issuers established in another Participating Jurisdiction. Also, portals established in one Participating Jurisdiction would be allowed to open their offerings to investors from other Participating Jurisdictions. Do you see any problems with this approach?

20) One of the major differences between the Crowdfunding Exemption and the Start-Up Exemption is that there is no registration requirement for the portal under the Start-Up Exemption. Do you think there are appropriate safeguards to protect investors without the registration of the portal? If not, please indicate what requirements should be imposed to the portal in order to adequately protect investors.

21) We are considering imposing a limit per calendar year of 2 capital raises by an issuer of a maximum amount of $150,000 under the exemption ($300,000 per year). Are these limits appropriate? If not, please provide what you would consider acceptable limits given the parameters of the proposed exemption.

22) The Start-Up Exemption would prohibit an investor from investing more than $1,500 in a single investment under the exemption. Is this limit appropriate? Should there also be a limit on the dollar amount that may be invested on a yearly basis by an investor?

23) Should there be minimal ongoing disclosure that issuers be required to provide to their security holders? If yes, what should it be?

24) We expect issuers using the Start-Up Exemption to maintain the information provided in the Issuer Information form and the Offering Document form updated throughout the distribution period. Should there be an obligation for issuers to further update that information outside the distribution period?

25) Should investors have the right to withdraw their subscription at least 48 hours prior to the disclosed offering deadline, as proposed under the Crowdfunding Exemption?

26) For Nova Scotia only, should Community Economic Development Investment Funds (CEDIFs) be eligible to use the Crowdfunding Exemption and/or Start-Up Exemption? If so, why? If not, why?

27) Are there other requirements that should be imposed to protect investors, taking into account the stage of development of the issuers susceptible to issue securities under the exemption?

Implementation by blanket order of the Start-Up Exemption

The Participating Jurisdictions, other than Saskatchewan, intend to adopt the Start-Up Exemption by way of a blanket order. The proposed blanket orders are designated as follows:
• Blanket Order 45-502 Start-Up Crowdfunding Prospectus and Registration Exemption in Manitoba;
Blanket Order on Québec Start-up Crowdfunding Prospectus and Registration Exemption in Québec;
• Blanket Order 45-506 in New Brunswick; and
• Blanket Order 45-524 in Nova Scotia.

The Start-Up Exemption already exists in Saskatchewan (General Order 45-925 – Saskatchewan Equity Crowdfunding Exemption) and there is no intention to revoke it. This current exemption in Saskatchewan is not being published for comment. The FCAA is publishing for comment a new version of this current exemption with a view to harmonizing the current exemption with other Participating Jurisdictions.

Request for comments

We welcome all comments on the Proposed Exemptions on or before June 18, 2014.

Please submit your comments in writing. If you are not sending your comments by email, please send a CD containing the submissions (in Microsoft Word format).

Please note that comments received will be made publicly available and posted on the websites of the AMF at and may be posted on the websites of certain other securities regulatory authorities. You should not include personal information directly in comments to be published. It is important that you state on whose behalf you are making the submission.

Please address your submission as follows:

Autorité des marchés financiers
Financial and Consumer Affairs Authority of Saskatchewan
Manitoba Securities Commission
Financial and Consumer Services Commission (New Brunswick)
Nova Scotia Securities Commission

Please deliver your comments only to the address below. Your comments will be distributed to the other Participating Jurisdictions.

Me Anne-Marie Beaudoin
Corporate Secretary
Autorité des marchés financiers
800, square Victoria, 22e étage C.P. 246, tour de la Bourse Montréal (Québec) H4Z 1G3
Fax : 514-864-6381

The proposed Crowdfunding Exemption and the proposed Start-Up Exemption are published with this notice.


Please refer your questions to any of the following:

Sylvie LalondeDirector, Policy and Regulations DepartmentAutorité des marchés financiers514 395-0337, ext. 4461 Patrick ThéorêtDirector, Corporate FinanceAutorité des marchés financiers514 395-0337, ext. 4381
Tony HerdzikDeputy Director, Corporate FinanceSecurities DivisionFinancial and Consumer Affairs Authority ofSaskatchewan306 787-5849 Liz KutarnaDeputy Director, Capital MarketsSecurities DivisionFinancial and Consumer Affairs Authority ofSaskatchewan306 787-5871

Chris Besko
Legal Counsel - Deputy Director
The Manitoba Securities Commission

Susan Powell
Deputy Director, Securities
Financial and Consumer Services Commission
(New Brunswick)
506 643-7697

Abel Lazarus
Securities Analyst, Corporate Finance
Nova Scotia Securities Commission
902 424-6859


Download the full CSA Notice: Draft Regulation 45-108 Respecting Crowdfunding