1.
Securities Crowdfunding Regulations
Elliott Mak
Senior Legal Counsel, Corporate Finance
BC Securities Commission
October 18, 2016

2.
• Part 1 : Overview of securities regulations
• Part 2 : Using the start-up crowdfunding
exemptions
• Part 3 : Regulations in other jurisdictions
Agenda

3.
Overview of Securities Regulations

4.
BCSC Mission
• Protect investors
• Facilitate efficient capital markets

5.
What Exemptions Do We Need?
• Prospectus requirement
• Registration requirement

6.
Current Regulations in BC
• BCI 45-535 Start-up Crowdfunding
• Offering Memorandum

7.
Regulations Outside BC
• MI 45-108 Crowdfunding
• ASC Rule 45-517 Prospectus exemption for
start-up business
• SEC Crowdfunding Regulation

8.
What About Debt Crowdfunding?
• “Security” includes evidence of indebtedness
• Distribution triggers prospectus requirement

9.
Using the Start-up Crowdfunding Exemptions

10.
How Start-up Crowdfunding Works

11.
The Instrument
• BC Instrument 45-535 Start-up Crowdfunding
Registration and Prospectus Exemptions
• Form 1 - Offering Document
• Form 2 - Risk Acknowledgement
• Form 3 - Funding Portal Information Form
• Form 4 - Funding Portal Individual Information
Form

12.
Start-up Crowdfunding Exemption
• Prospectus Exemption
• Dealer Registration Exemption

13.
Start-up Crowdfunding
• Up to $250,000, two times per year
• Investor limit of $1,500
• Through registered portal or portal using
registration exemption

14.
Who Can Participate?
• Not available to reporting issuer or
investment fund
• Located in participating jurisdiction
• No common principals with portal

15.
Offering Document
• Details: idea, business and distribution
• No financial statement requirements
• Must be true

16.
Raising the Minimum Amount
• 90 days to raise minimum amount
• Funds held in trust until closing
• Concurrent distributions

17.
How to Invest
• Electronically through portal
• Acknowledge risk warning
• Right of withdrawal

18.
Risk Acknowledgement Form

19.
Post-Closing
• Deliver confirmation to purchaser
• Filings
 Offering Document
 Exempt Distribution Report
• Restricted period

20.
Using the Prospectus Exemption
• Read published guidance including offering
document instructions
• File exempt distribution report

21.
Registration Exemption
• Issuers must use a funding portal
• Who can operate funding portals?
 Registered in an appropriate category
 Exempt – if they meet all conditions

22.
Registration Exemption
• Key conditions of the registration exemption:
 Deliver prescribed filings
 No investment advice
 Holds investors’ assets in trust

23.
Registration Exemption
• Other key conditions:
 Not registered under securities legislation
 Head office located in Canada
 Exempt portal acknowledgement

24.
Registered Firms
• Registered firms must:
 Confirm they meet certain conditions
 Registered in an appropriate category
 File a Form 33-109F5 Change of Registration
Information

25.
Setting Up a Funding Portal
• Read funding portal guide
• Make test environment available

26.
Additional Resources
• CSA Notice 45-316
• Capital Raising for Small Business
• Practice guides

27.
Regulations in Other Jurisdictions

28.
MI 45-108
• $1,500,000 raised by issuer group within
12-month period
• Investment limit of $2,500 (many exceptions)
• Financial statements
 Point-of-sale
 ongoing

29.
MI 45-108 Funding Portals
• Must be restricted dealer, investment dealer
or EMD
• Restricted dealer exempt from KYC and
suitability
• Limited due diligence required on issuer

30.
BCI 72-505
• BC company can use MI 45-108 to access
investor outside BC
• All conditions of MI 45-108 must be met

31.
Start-Up Business Prospectus (AB)
• Prospectus exemption only – no portal
required
• $1,000,000 maximum aggregate raise
(lifetime) for issuer group
• Tiered investment limits

32.
Crowdfunding Availability
Exemption Available Jurisdictions
MI 45 – 108 only ON
Start-up crowdfunding only BC
AB start-up business only AB
MI 45-108 and start-up crowdfunding SK, MN, QC, NB, NS
No “crowdfunding” exemption NL, PE, YK, NT, NU

33.
SEC Crowdfunding
• $1 million in a 12-month period with tiered
investment limits
• Financial statements
 Point-of-sale
 Ongoing
• “Intermediary” must be registered as a
broker dealer or “Funding portal”

34.
Questions

35.
For More Information
www.bcsc.bc.ca
Elliott Mak
Senior Legal Counsel
Corporate Finance
604-899-6501
emak@bcsc.bc.ca