UPDATE (July 30th 2020): The OSC has now announced the introduction of Ontario Instrument 45-506, an interim order offering all funding portals and EMDs registered in Ontario the opportunity to help raise capital for startups, and also enabling all Ontario residents to invest in them. The launch of 45-506 builds on FrontFundr's own pioneering work with the OSC in implementing 45-505, as outlined below.
Announcements about updated “rules and regulations” seldom make for good content. These new pieces of legislation, often represented by unintelligible mixes of letters and numbers, hardly roll off the tongue. It’s also not always clear exactly what they’re designed to change, or why they’ve even been introduced in the first place.
But this time it’s different.
The introduction of Ontario Instrument 45-505 last week, designed and implemented in collaboration with FrontFundr and the Ontario Securities Commission (OSC)*, has introduced a truly game-changing piece of legislation. Game-changing not only when it comes to crowdfunding and capital raising, but also with regards to the growth and development of the Canadian economy.
Ontario Instrument 45-505 is unique because:
It now means that FrontFundr is able to assist in connecting entrepreneurs with investors, and providing investors with investment opportunities, all across the country. This applies regardless of where entrepreneurs are or where they do business. It applies coast to coast, 24/7, 365 days a year.
No other platform or provider is able to offer this type of comprehensive, nationwide coverage.
The introduction of 45-505 represents a crucial and significant step toward FrontFundr’s mission of democratizing the private markets in Canada, by opening them up to all investors and entrepreneurs alike, regardless of where they are in the country.
From Fractious to Funded
Now, the same rules apply whether you’re in B.C., Ontario, Nova Scotia or anywhere in between. Key features of the new securities rule include that:
The head office for the company is located in Canada**
The funds raised do not exceed $250,000 during a 90 day campaign***
The company raises up to twice in a calendar year
Each investor invests up to $1,500, or $5,000, if deemed suitable
FrontFundr operates as Exempt Market Dealer so can also use all other prospectus exemptions (such as the Accredited Investor exemption), concurrently with the 45-505, so companies can raise amounts greater than $250,000 per raise through the platform
For the first time in Canada, we have a clear and concise rule for raising start-up capital across the country. This may seem strange to most people - and we have received lots of blank expressions and comments from our users on the subject - there’s always just been the assumption that Canadians always had something simple in place, similar to what other countries such as the UK and US have.
But, until now, this has not been the case. Canada’s system of separate provincial securities commissions means change does not come quick or easy, but through our continued efforts to improve the playing field for innovators and investors across this land, we remain vigilant in our work with the regulators and focused on our goal to democratize the capital markets and bring greater opportunity to everyone.
Covid, Canada & Capital
The introduction of this regulation, and the positive implications it will have for capital raising and the private markets in Canada, are especially important given the current economic climate we find ourselves in. Our economy has been hit hard by the pandemic and the collective response to try and combat it is only really just beginning in earnest.
Indeed, for the long term growth and success of our economy, it is essential that the ability to move capital remains unhindered (often a difficult feat during prolonged downturns). By nurturing and expanding the connection between entrepreneurs and investors, that is allowing entrepreneurs to raise capital from all types of investors across the country and, similarly, offering all Canadian investors the chance to invest in as many promising and growing companies as possible, FrontFundr is actively working toward providing a solution.
As a business we are fully committed to the collective effort of building our economy back up to strength. Ontario Instrument 45-505, coupled with the various other initiatives we have been working on in response to Covid-19, are testament to that. We are the only platform covering all of Canada that is able to cater to the needs of startups eager to grow, and likewise to investors eager to back promising companies and contribute to our country's overall well-being. Not only that, as our business is 100% online, all this can be achieved from the comfort of your own home!
* The Ontario Securities Commission is responsible for regulating capital markets in Ontario. Their mandate is to “provide protection to investors from unfair, improper or fraudulent practices, to foster fair and efficient capital markets and confidence in capital markets, and to contribute to the stability of the financial system and the reduction of systemic risk.”
** Currently NL, PEI and the territories are not participating jurisdictions.
*** A company may use other exemptions to raise amounts greater than $500,000.00 in a calendar year.