VanFUNDING 2016: Mechanics of Securities Crowdfunding Regulations
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The document provides an overview of securities crowdfunding regulations in British Columbia, focusing on exemptions for startups, their operational frameworks, and participant requirements. Key elements include the use of specific forms for offering documents, risk acknowledgments, and the need for registered funding portals. It also compares regulations with other jurisdictions and outlines investment caps and conditions for both issuers and investors.
VanFUNDING 2016: Mechanics of Securities Crowdfunding Regulations
- 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
- 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 [email protected]