Canadian Securities Regulators Unveil New Crowdfunding Rules

7:08 AM PST 03/21/2014 by Etan Vlessing

Provincial agencies have put limits on startups looking to raise equity to address concerns about online fraud.

TORONTO – Canadian securities regulators have opened the door to crowdfunding.

Provincial regulators have extended their oversight to allowing startups, including film, TV and gaming projects and tech ventures, to raise capital by selling equity to small investors online.

"We think that crowdfunding can be a viable method for startups and SMEs to raise capital," the provincial regulators said in a statement issued on Thursday.

Canadians watched as U.S.-based Kickstarter helped bring the Veronica Mars movie to theaters.

Indiegogo has been open to Canada since the platform launched in 2008, while Kickstarter only launched north of the border last year.

Even with Canadian regulators re-thinking crowdfunding, local film projects may still be hard-pressed to raise sufficient capital online.

Wary of exposing investors to online fraud, provincial regulators from Ontario, British Columbia, Quebec, Manitoba, Saskatchewan, New Brunswick and Nova Scotia now differ on how much crowdfunders can raise.

The Ontario Securities Commission, the country's largest, allows film and TV producers to raise a maximum CAN$1.5 million (US$1.34 million) per offering over a 12-month period.

And individual investors will only be able to put up to CAN$2,500 (US$2,232) into a single project, with a CAN$10,000 (US$890,000) cap in any given year.

"We have done so (allowed crowdfunding) in a balanced and responsible manner that is intended to facilitate capital raising while maintaining an appropriate level of investor protection," said Howard Weston, OSC chair and CEO, in a statement.

The British Columbia Securities Commission ruled crowdfunders will only be able to raise up to CAN$150,000 (US$134,000), twice a year, with individuals limited to a maximum CAN$1,500 (US$1,340) investment via an online funding portal.

"We feel that this crowdfunding model could address a gap in the financing needs of startup and early-stage companies in B.C., said Brenda Leong, BCSC chair, in a statement.

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