Invest Crowdfund Québec

Pour l'adoption d'Invest Crowdfunding au Québec | For the adoption of Invest Crowdfunding in Quebec


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Response to the AMF Equity Crowdfunding Exemption Proposal

We are honoured to take part in the consultative process of what we believe to be this decade’s most innovative solution to Canada’s financial gap. Without further a due, we present to you our response to the Autorité des marchés financiers with regards  to the new equity crowdfunding exemption REG 45-108.

We applaud the Autorité des marchés financiers (hereinafter «Autorité») on their initiative to expand the application of equity crowdfunding to established businesses and start-ups. We would also like to thank the National Crowdfunding Association of Canada and team for their support and awareness-building initiative.

Our feedback was requested on the following set of 27 questions:

Crowdfunding Exemption
Issuer qualification criteria

1) Should the availability of the Crowdfunding Exemption be restricted to non-reporting issuers?

2) Is the proposed exclusion of real estate issuers that are not reporting issuers appropriate?

3) The Crowdfunding Exemption would require that a majority of the issuer’s directors be resident in Canada. One of the key objectives of our crowdfunding initiative is to facilitate capital raising for Canadian issuers. We also think this requirement would reduce the risk to investors. Would this requirement be appropriate and consistent with these objectives?

Offering parameters

4) The Crowdfunding Exemption would impose a $1.5 million limit on the amount that can be raised under the exemption by the issuer, an affiliate of the issuer, and an issuer engaged in a common enterprise with the issuer or with an affiliate of the issuer, during the period commencing 12 months prior to the issuer’s current offering. Is $1.5 million an appropriate
limit? Should amounts raised by an affiliate of the issuer or an issuer engaged in a common enterprise with the issuer or with an affiliate of the issuer be subject to the limit? Is the 12-month period prior to the issuer’s current offering an appropriate period of time to which the limit should apply?

5) Should an issuer be able to extend the length of time a distribution could remain open if subscriptions have not been received for the minimum offering? If so, should this be tied to a minimum percentage of the target offering being achieved?

Restrictions on solicitation and advertising
6) Are the proposed restrictions on general solicitation and advertising appropriate?

Investment limits

7) The Crowdfunding Exemption would prohibit an investor from investing more than $2,500 in a single investment under the exemption, and more than $10,000 in total under the exemption in a calendar year. An accredited investor can invest an unlimited amount in an issuer under the AI Exemption. Should there be separate investment limits for accredited investors who invest through the portal?

Statutory or contractual rights in the event of a misrepresentation

8) The Crowdfunding Exemption would require that, if a comparable right were not provided by the securities legislation of the jurisdiction in which the investor resides, the issuer must provide the investor with a contractual right of action for rescission or damages if there is a misrepresentation in any written or other materials made available to the investor (including video). Is this the appropriate standard of liability? What impact would this standard of liability have on the length and complexity of offering documents?

Provision of ongoing disclosure

9) How should the disclosure documents best be made accessible to investors? To whom should the documents be made accessible?

10) Would it be appropriate to require that non-reporting issuers provide financial statements that are either audited or reviewed by an independent public accounting firm? Are financial statements without this level of assurance adequate for investors? Would an audit or review be too costly for non-reporting issuers?

11) The proposed financial threshold to determine whether financial statements are required to be audited is based on the amount of capital raised by the issuer and the amount it has expended. Are these appropriate parameters on which to base the financial reporting requirements? Is the dollar amount specified for each parameter appropriate?

Other
12) Are there other requirements that should be imposed to protect investors?

Crowdfunding Portal Requirements
General registrant obligations

13) The Crowdfunding Portal Requirements provide that portals will be subject to a minimum net capital requirement of $50,000 and a fidelity bond insurance of at least $50,000. The fidelity bond is intended to protect against the loss of investor funds if, for example, a portal or any of its officers or directors breach the prohibitions on holding, managing, possessing or
otherwise handling investor funds or securities. Are these proposed insurance and minimum net capital amounts appropriate?

Additional portal obligations

14) Do you think an international background check should be required to be performed by the portal on issuers, directors, executive officers, promoters and control persons to verify the qualifications, reputation and track record of the parties involved in the offering?

Prohibited activities

15) The Crowdfunding Portal Requirements would allow portal fees to be paid in securities of the issuer so long as the portal’s investment in the issuer does not exceed 10%. Is the investment threshold appropriate? In light of the potential conflicts of interest from the portal’s ownership of an issuer, should portals be prohibited from receiving fees in the form
of securities?

16) The Crowdfunding Portal Requirements restricts portals from holding, handling or accessing client funds. Is this requirement appropriate? How will this impact the portal’s business operations? Should alternatives be considered?

Other

17) Are there other requirements that should be imposed on portals to protect the interests of  investors?

18) Will the regulatory framework applicable to portals permit a portal to appropriately carry on business?

Start-Up Exemption

19) Considering that the Start-Up Exemption will be substantially harmonized amongst the  Participating Jurisdictions, it is our intention to allow a portal established in one Participating Jurisdiction to post offerings from issuers established in another Participating Jurisdiction.

Also, portals established in one Participating Jurisdiction would be allowed to open their offerings to investors from other Participating Jurisdictions. Do you see any problems with this approach?

20) One of the major differences between the Crowdfunding Exemption and the Start-Up Exemption is that there is no registration requirement for the portal under the Start-Up Exemption. Do you think there are appropriate safeguards to protect investors without the registration of the portal? If not, please indicate what requirements should be imposed to the portal in order to adequately protect investors.

21) We are considering imposing a limit per calendar year of 2 capital raises by an issuer of a maximum amount of $150,000 under the exemption ($300,000 per year). Are these limits appropriate? If not, please provide what you would consider acceptable limits given the parameters of the proposed exemption.

22) The Start-Up Exemption would prohibit an investor from investing more than $1,500 in a single investment under the exemption. Is this limit appropriate? Should there also be a limit on the dollar amount that may be invested on a yearly basis by an investor?

23) Should there be minimal ongoing disclosure that issuers be required to provide to their security holders? If yes, what should it be?

24) We expect issuers using the Start-Up Exemption to maintain the information provided in the Issuer Information form and the Offering Document form updated throughout the distribution period. Should there be an obligation for issuers to further update that information outside the distribution period?

25) Should investors have the right to withdraw their subscription at least 48 hours prior to the disclosed offering deadline, as proposed under the Crowdfunding Exemption?

26) For Nova Scotia only, should Community Economic Development Investment Funds (CEDIFs) be eligible to use the Crowdfunding Exemption and/or Start-Up Exemption? If so, why? If not, why?

27) Are there other requirements that should be imposed to protect investors, taking into account the stage of development of the issuers susceptible to issue securities under the exemption?

 

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The AMF To Facilitate Access to Capital by SMEs…One Step Closer to Equity Crowdfunding

hands-moneyThe AMF To Facilitate Access to Capital by SMEs…One Step Closer to Equity Crowdfunding

To facilitate access to Capital by SMEs, the securities commission from 9 provinces have each published a harmonized interim local order that provides exemptions from financial statement-related requirements. In short, individual investors – non-accredited and with no relationship to the equity-funded business – will be able to invest and those businesses issuing equity will not be required to file a prospectus (onerous expenditure) for investments under $500K. http://lnkd.in/RYtGHk

In addition, the Commission is prepared to consider applications for registration by funding portals on a case-by-case basis.


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Technicity Event: Ontario Runner-Up for Equity Crowdfunding. Is Quebec Next?


Screen Shot 2012-12-03 at 7.35.35 AMOntario may well be the next adopter of Invest Crowdfunding ahead of the U.S. 

Thursday morning, the Hon. Brad Duguid, Minister of Economic Development and Innovation was the honorary guest at Technicity, the first Equity Crowdfund Conference in Ontario. Min. Duguid spoke about the potential benefits that equity-based crowdfunding provides for entrepreneurs and said once the Ontario Securities Commission completes a review, the provincial government would look at ways to move forward with changes.

Great panel, crowd and organization and more importantly the outcome that I will highlight further. It was also a rare opportunity to meet up with the other shakers of  Invest CrowdFund Canada :  Dr. Cindy Gordon, national Chair of ICC and CEO of Helix Commerce Intl, Fawn Annan VP for Ontario and CEO of IT World Canada, Andrew Weir VP national communications, Debra Chander VP National marketing, and Barry Gander, i-Canada co-Founder. I also had a serendipitous moment, meeting Craig Asano, Executive Director of the National Crowdfunding Association of Canada, with whom I’ve been exchanging emails with for the past weeks and had yet to meet.

A Room Full of Believers in Equity Crowdfunding

The entire Canadian ecosystem was present and the excitement palpable. When Darren Westlake, co-founder of CrowdCube, UK’s Equity crowdfunding platform, took the stand, we had high expectations and were not disappointed. Darren walked us through the process of an equity crowdfunded business, provided key success metrics and gave us a view of what lies ahead for equity CF sites. I tweeted as I listened (see end of post). All provinces needed to catch a glimpse of the lessons learned and the opportunities, and more importantly realize that we all share the same concerns: the need for democratizing investment to close the financial gap and stir innovation.

The keynote was followed by a panel discussion including top influencers from the technology, regulatory, banking and VC sectors: CEO of ING Canada, Peter Aceto ; founder of Stratus Capital and a board director at the Toronto Angel Group, Dr. Richard Reiner; creator of Social Venture Exchange, Adam Spence and Dr. Cindy Gordon, who moderated the event. There was great talk on Ontarian initiatives to boost innovation and Canadian-specific requirements, i.e. tax incentives for equity crowdfunded businesses.

The third highlight of this matinee was the group table dialogue moderated by Chairman of the Exempt Market Dealers Association, Brian Koscak. In short, each table was asked to discuss three questions that were later shared in plenary. Our set of questions: Should issuers be subject to an annual limit on how much they can raise? Should issuers be subject to a minimum and maximum offering threshold? Should securities be limited to equity only or debt and equity?

This session gave way to much discussion and differing opinions. It’s all good. This is how change starts to take place. The value lies not in the “right” answers but in addressing the right questions, having such a large number of interested and engaged professionals.

What is the main motivator for Equity crowdfund investors?

One crucial teaching that I take with me is that equity crowdfund does not belong to one select group but to all. And to confine it to the financial or regulatory sphere is a mistake. Yes, equity CF addresses financial and regulatory concerns, i.e. how much does one invest? How much can one raise?, and for good reason. Yet it also addresses regional/municipal economic growth and innovation rate, i.e. investing in a company for reasons other than financial. Darren nailed it when he said

Financial return is not the main motivator, supporting SMEs is.

Because you may not see a return in VC terms (<5 years) but you will be contributing locally to the long term growth of businesses and job creation. And as Darren mentioned, these SMEs eventually scale and their value increases thus interesting other categories of investors. It’s a win-win.

Why accelerate the adoption of Equity Crowdfunding in Quebec?

First and foremost, start-ups are leaving Quebec for better (financial) conditions. Love money and bootstrapping are NOT accessible to every entrepreneur. Some keep their day jobs and work nights to make their great idea actionable but with a lot of collateral damage. Those that do succeed with some help of their close circles need more funding to scale and acquire new clients. Yet VCs and Angels can only fund so many start-ups in early or later stage. This leaves quite a large crowd of entrepreneurs who more often than not, call it quits (50% of SMEs have a lifespan of 5 years).

Then I ask you. How can Invest/Equity Crowdfunding not be part of the public agenda? As Ontario, this should become a concern for all: the Prime Minister, the Ministry of development and innovation, the Ministry of small business, corporations, SMEs, start-ups, VCs, angels, business associations, exempt market dealers, regulatory agencies, strategists, social media experts, IT experts, securities lawyers, academia, individual investors, Julie, John, Mr and Mrs Smith, and the generations to come.

Why wait-n-see, especially when the market is clearly sending out signals that Equity CF works? Naysayers may respond “sure, it works in Australia or UK, but it isn’t going to work here.”, “It’s going to kill our VCs” or “No one knows what Invest CF is,  let’s wait it out”. I am a partisan of dialogue among stakeholders and I believe that in lieu of making assumptions amongst ourselves, we should create an open public arena. Our blog is one those places and we welcome your questions, concerns, suggestions. Last Monday’s short talk at Crowdfund Night was yet another opportunity and people came up to me with more questions. Yes, the interest is there and we must cultivate it.

Seemingly, Ontario is next up to adopt Invest Crowdfunding, and other provinces will follow suit. We do not want to see our country divided, hence running the risk of losing our Quebec entrepreneurs to other regions, where more diversified financing mechanisms will be in place sooner than later.

If you would like to accelerate the adoption of crowdfund Investing, we welcome the addition of your strengths to our cause. Contact us. Many thanks.

 

Twitter Feed @Technicity:

29 Nov ‏@Yazziness #technicity Government should propose tax incentive to #Crowdfundinvestors as in UK. Agreed.
29 Nov@Yazziness #technicity Banks will see invest #crowdfunding as a wonderful opportunity, to meet entrepreneurs early on in their life cycle – Peter Aceto
29 NovBrian Jackson ‏@brianjjackson Darren saw a supply/demand problem in the UK of too many businesses looking for capital, not enough angels. Sounds familiar#technicity Retweeted by Diana
29 Nov@Yazziness @TechnicityTO how banks can get involved in invest #crowdfundingPeter Aceto @ingdirect speaking
29 Nov ‏@Yazziness #technicity shares b for crowd, shares a for accredited.@Crowdcube
29 Nov ‏@Yazziness #technicity Little due diligence. ID checks and money-laundering checks done for every business @crowdcheck29
29 Nov ‏@Yazziness#technicity @Crowdcube crowd funded their business. 300k pounds raised. 160 investors
29 Nov@Yazziness#technicity average investment 1800 pounds. 31 successful deals in 18 months. Total funds raised 4.2 m pounds #crowdcube
29 Nov‏@Yazziness #technicity Investor survey: financial return is not the main motivator for invest #crowdfunding. Supporting SMEs is. – Crowdcube CEO
29 Nov@Yazzines#technicity Strong vetting process @crowdcube – 25% acceptance rate invest #crowdfunding


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Crowdfund Night Recap

I attended Crowdfund Night yesterday at the Notman House and saw familiar faces. The Plebs and Make a Champ crowdfunding platform founders, to name a few. There is clearly a growing trend in Quebec to bypass the current financing structures. For many reasons. One, not everyone gains access to financial programs and two, it can take months until you do receive funding if you are selected. Hence, viable and right-on-target projects often see their days counted and end up in the sewer. Plebes and Make a Champ address those needs. They select their projects carefully, assessing their worth (past, present, future) prior to engaging with them.

This said, the “other” model – Equity crowdfunding or Invest crowdfunding – is more complex as it involves securities regulation. Buying private equity online through a web platform is a formidable way of helping businesses scale yet there are potential pitfalls along the way. Last night, I gave a talk on Invest Crowdfunding, the “Localvesting” model:  how it could create sustainability, how mom and pop investors should have the opportunity to invest in a business they believe in, how fraud is kept to a minimum in invest crowdfunded nations, and social medias’role. In short, how this model fits well within the Quebec ecosystem. We also discussed what it takes to make it legal in Quebec and the rest of Canada.

Since our last presentation, I got the distinct impression that awareness around this model is growing. Questions from the crowd were more acute. “Which sectors will benefit from this model?”, “Are there support structures in place to help businesses crowdfund?”, “How does share valuation work?”. It’s safe to say that grassroot initiatives like ours are beginning to unfold. Public speaking is one facet of our movement. Content generating/curation, all-around networking, engaging within our communities, think tanks and our own professional endeavours are also part of the equation.

At Invest Crowdfund Quebec, our objective remains to inform, educate, and create awareness. At our next team meeting, we’ll be mapping out 2013 action plan. We invite our readers to show their support by attending events, asking more questions on this blog, recommending articles and generating content. These questions and thoughts will contribute to the framework we are building in collaboration with the other provinces. Such a framework is a gateway to convincing our authorities to put  Invest Crowdfunding on the public agenda.

Special Thanks to the organizers Heri Rakotomalala and Bruno Rakotozafy who did an awesome job!


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Special Event: Crowdfundnight at Notman

Crowdfunding, donation or reward-based,  is the new way of funding projects. Crowdfundnight will highlight successful campaigns and how entrepreneurs are doing it. Our own Eric Bisson, founder of Plebs.ca, the latest Montreal donation-based crowdfunding platform, will walk us through the funding process.

And for those who missed Montreal New Tech’s edition on Crowdfunding, we’ll also present the latest developments on Invest Crowdfunding in the US & Canada and what to watch for in the coming months.

Register here. See you there!

The Invest Crowdfund Quebec team


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Les Montréalais sont-ils “pour” le Invest Crowdfunding?

Les Montréalais sont-ils “pour” le Invest Crowdfunding?

VC TV leur a demandé…

C’est à l’occasion de l’édition spéciale “Invest Crowdfunding” organisée par Montreal New Tech au mois d’octobre, qui a permis à 3 start-ups engagés dans ce domaine de pitcher à une audience d’environ 200 personnes de tous horizons: les entreprises en démarrage, les investisseurs, les organismes règlementaires, les plateformes de crowdfunding, les grandes entreprises, les stratèges, les relations publiques, les médias…

Diana Yazidjian de Invest Crowdfund Québec a fait un tour d’horizon du financement participatif pour investisseurs pratiqué ailleurs dans le monde, donné quelques chiffres sur l’écart de financement au Québec et invité tous un chacun à signer la pétition électronique pour son adoption.


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Are Montrealers “for” the Adoption of Invest Crowfunding?

Are Montrealers “for” the Adoption of Invest Crowfunding? 

Check it out…

Montreal New Tech organized a special Invest Crowdfunding edition this past October, featuring start-ups engaged in that area. The event gathered nearly 200 people. Start-ups, VCs, policy-makers, crowdfunding platform providers, large corporations, strategists, PR, media, …

Diana Yazidjian of Invest Crowdfund Quebec presented the landscape of Invest Crowdfunding practiced in other parts of the world, the financial gap in Quebec and concluded with a call-to-action to sign the petition