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Ontario proposes crowdfunding rules, British Columbia takes different approach

TORONTO - The Ontario Securities Commission is proposing new rules to allow start-ups and early-stage businesses to raise up to $1.5 million a year from individuals through registered crowdfunding web portals.

Several other agencies, in Saskatchewan, Manitoba, Quebec, New Brunswick and Nova Scotia, said Thursday they'll also publish the Ontario proposals for comment at the same time.

But the British Columbia Securities Commission made it clear Thursday that it has a different approach in mind.

"The BCSC is not publishing the Ontario crowdfunding proposal at this time, but will monitor crowdfunding developments across the (Canadian Securities Administrators)," the B.C. agency said.

Entrepreneurs use crowdfunding to pitch their ideas directly to large numbers of consumers, who then invest typically small amounts in the startup. There have been concerns that individual investors could be at risk of fraud if they are victims of unscrupulous schemes.

OSC chief executive Howard Wetston said Ontario's approach would provide new regulatory rules to provide businesses with more access to capital and expand opportunities for investors.

"We have done so in a balanced and responsible manner that is intended to facilitate capital raising while maintaining an appropriate level of investor protection," Wetston said in a statement.

Ontario's proposed rules would allow businesses to raise up to $1.5 million during a 12-month period through a crowdfunding portal that has been registered with securities regulators.

The OSC proposal would also limit how much an investor can invest — a maximum of $2,500 in a single investment and $10,000 per year.

The B.C. approach would differ in several ways, including allowing crowdfunding portal to operate without being registered under securities legislation if it meets certain criteria.

The BCSC also says it would limit issuers to raise no more than $150,000 per offering and limit them to no more than two offers or up to $300,000 per year — only a fifth as much as Ontario would allow.

In addition, the B.C. commission would limit investors to $1,500 per offering.

All the agencies said the proposed changes will be subject to a 90-day public comment period closing June 18.

The other proposed changes outlined by the OSC on Thursday include one plan to allow a company to raise money based on comprehensive disclosure document and another that would allow family, friends and business associates to more easily invest in start-ups and early stage businesses.

The fourth change would allow public companies listed on the Toronto Stock Exchange, TSX Venture Exchange and Canadian Stock Exchange to raise money from their existing investors based on the public disclosure.

Websites like Kickstarter have raised the popularity of crowdfunding with projects like the Veronica Mars movie, which was funded by fans of the now defunct TV show.

However, investing in start-up businesses can be extremely risky and critics of crowdfunding have raised concerns about the possibility for fraud.

Last year, the U.S. Securities and Exchange Commission released crowdfunding proposals for how much people could invest and how much companies must disclose.

The Canadian Press


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