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EMDA Supports OSC’s Consideration of Offering Memorandum and Equity Crowdfunding Exemptions

September 3, 2013  
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EMDA Supports OSC’s Consideration of
Offering Memorandum and Equity Crowdfunding Exemptions

Toronto, ON, September 3, 2013 - On August 28, 2013, the Ontario Securities Commission (OSC) released a progress report on its review of certain prospectus exemptions to facilitate capital raising in Ontario (the OSC Progress Report) as set out in OSC Staff Consultation Paper 45-710 Considerations for New Capital Raising Prospectus Exemptions published on December 14, 2012 (the Consultation Paper).

The OSC Progress Report states that after reviewing feedback from a broad range of stakeholders, the OSC has determined it will consider the following capital raising prospectus exemptions:

  • an offering memorandum (OM) exemption (the OM exemption);
  • an equity crowdfunding exemption;
  • a family, friends and business associates exemption; and
  • a streamlined version of the existing rights offering exemption currently available across Canada.
OM Exemption on Ontario’s Agenda

The Exempt Market Dealers Association of Canada (EMDA) is very pleased that the OSC is considering adopting a form of OM exemption for Ontario. The EMDA has been advocating for Ontario to adopt a form of OM exemption following the Alberta model for some time (review our advocacy timeline here), however, we have proposed two additional requirements, that: (a) the exemption involve a registered dealer to enhance investor protection; and (b) OMs should be publicly posted to provide greater transparency for market participants and investors. The EMDA has referred to its form of OM exemption as the ‘Eligible Investor Exemption’ as set out in our comment letters to the OSC which are publicly available on the OSC’s website. Accordingly, the EMDA supports the OSC’s review of the OM exemption under the Alberta model rather than viewing it as a variation of a crowdfunding exemption as discussed in its Consultation Paper.

Brian Koscak, Chairman of the EMDA, remarks, "We commend the OSC for its hard work and consultative process in considering new capital raising exemptions for Ontario. The EMDA believes the OSC’s number one priority should be to adopt a form of OM exemption for Ontario. We welcome a national and harmonized OM exemption; however, we support Ontario adopting its own form of OM exemption if that harmonization process takes too long to work through the CSA.

Geoff Ritchie, Executive Director of the EMDA states, "We have a funding gap in Ontario, and it holds back the development of emerging businesses and limits options for Ontario investors. The root cause is a prospectus exemption gap in Ontario. Between the private issuer exemption and the accredited investor exemption, there are not many prospectus exemptions for private or public companies to raise capital in Ontario. The OM exemption will meet that need and be good for Ontario’s economy and Ontario investors.


The OM exemption, as set out in Section 2.9 of National Instrument 45-106 – Prospectus and Registration Exemptions (NI 45-106), is available across Canada except for Ontario. The OSC states that it will consider the Alberta form of OM exemption which, among other things, limits investments to $10,000 from the public unless the investor is an ‘eligible investor’. An eligible investor includes a person whose: (a) net assets, alone or with a spouse, in the case of an individual, exceed $400,000; and (b) net income before taxes exceeded $75,000 in each of the two most recent calendar years and who reasonably expects to exceed that income level in the current calendar year.

The OSC will consider whether additional measures should be included in any form of OM exemption in Ontario, including: (a) whether and how the form of OM could be streamlined so that it is more cost-effective for small and medium-sized companies and more user-friendly for investors; (b) possible limits on the types of securities offered; and (c) appropriate investment limits.

Equity Crowdfunding

The OSC Progress Report states that the OSC is still considering a form of equity crowdfunding exemption for Ontario which it hopes will strike the right balance between protecting investors while not imposing excessive regulatory costs on issuers and funding portals. The EMDA supports selling securities on the internet by registered dealers and for Canada to adopt an equity crowdfunding framework that is harmonized and nationalized across the country.

Family, Friends and Business Associates Exemption

The private issuer exemption permits raising capital from certain enumerated categories of investors, including close personal friends, close business associates and certain family members of a director, executive officer, founder or control person of an issuer. Ontario is the only jurisdiction in Canada that does not have a form of family, friends and business associates exemption in Canada as a stand-alone exemption. The OSC Progress Report states the OSC is considering adopting a broader family, friends and business associates exemption with the goal of harmonization across Canada.

Other Highlights

The OSC Progress Report provides a summary of comments on the Consultation Paper, an investor survey report and the OSC’s findings from its research involving small and medium-sized enterprises.

The OSC Progress Report stated that the OSC will not be considering the following prospectus exemptions or amendments that it discussed in its Concept Proposal: (a) the investor sophistication exemption; (b) the registrant advice exemption; (c) changes to the existing private issuer exemption; or (d) the re-introduction of the closely-held issuer exemption.


About the Exempt Market Dealers Association of Canada

Exempt Market Dealers Association of Canada (EMDA) is a not-for-profit industry association that brings together exempt market issuers, exempt market dealers and professional advisers to the exempt market. The EMDA is the leading national industry voice for the exempt market to securities regulators, government agencies and the capital markets and provides valuable services and benefits to its members, including: exclusive customized insurance programs for exempt market dealers, regulatory and compliance guidance, opportunities for professional development and continuing education, and access to a network of exempt market professionals from coast to coast. For more information please visit our website:


For more information, please contact:

Brian Koscak
EMDA Chairman


David Gilkes

EMDA, Vice Chairman

Geoffrey Ritchie

EMDA Executive Director