In our previous post, we explained the evolution of crowdfunding in Alberta. This installment looks at the future of crowdfunding in the province.
In order to address the fact that current exemptions may not allow smaller companies to raise money while complying with securities laws in a cost-efficient manner (as addressed in our last entry), the ASC, in collaboration with the Nunavut Securities Office, recently proposed a new exemption to facilitate capital raising by start-up and early stage companies. Although not limited to crowdfunding, the proposed exemption could be used to raise funds through an online portal. The proposed exemption was published for public comment and the ASC is now considering those comments. In the next few months, the ASC will make a decision regarding whether to adopt the exemption and, if so, whether to make any changes to the original proposal.
If the original proposal is adopted, the new prospectus exemption would allow a person or company to raise up to $1 million. Prospective investors would be given an abbreviated disclosure document containing certain specified information and have to sign a bluntly worded risk warning. To offset the risks associated with the reduced disclosure, the maximum investment that could be accepted from any one investor would be $1,500 in a business, or $5000 if the investor secured advice from a registered dealer. As with all investments, the public is encouraged to do their homework (check registration, enforcement history, suitability) to protect themselves and their financial future.
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