Securities regulation and fintech companies

There are two core requirements underlying Ontario securities laws:

Prospectus

Every person or company that distributes previously unissued securities must file and obtain a receipt for a prospectus with the Ontario Securities Commission (OSC). A prospectus protects investors by providing them with a comprehensive disclosure document with enough information to make an informed investment decision. There are also certain prospectus exemptions that allow companies to raise capital without preparing a prospectus.

Registration

Every person, company, or online portal that is in the business of selling or advising in securities must be registered (or licensed). This requirement is meant to ensure that those who are in the business of selling securities have the required proficiency, integrity, and suitability to advise their clients.

In general, firms must register with the OSC if they conduct any of the following activities in Ontario:

• are in the business of trading in, or advising anyone with respect to investing in securities (also referred to as the “business trigger” for registration)
• act as an underwriter or an investment fund manager
• conduct trading activities involving commodity futures contracts or commodity futures options

Individuals must register if they:

• trade, advise, or underwrite on behalf of a registered dealer or adviser, or
• act as the ultimate designated person or chief compliance officer of a registered firm

Find related information about dealer, adviser, and investment fund manager registration:

• getting registered in Ontario
• how to register a firm
• how to register an individual
• ongoing requirements
• topical guide for registrants 

You may need to comply with securities law requirements if your business involves:

• online platforms (including websites and apps) that connect investors with companies seeking to raise capital
• preparing offering documents, marketing materials, or other similar documents for companies looking to raise capital
• initial token offerings (ITOs), initial coin offerings (ICOs), crypto-asset trading platforms, exchanges or marketplaces, or crypto-asset funds, and fund management
• investor networks and organizations, and the platforms that support them
• lending platforms that allow investors to fund loans (or portions of loans)
• technology or data-driven investment activities or advice, including online advice and AI

Still not sure if securities laws apply to you? Contact the OSC LaunchPad team.

The OSC recognizes that a prospectus offering can be costly and that early stage companies need flexibility to raise capital efficiently. There are exemptions from the prospectus requirement that may be used by early stage businesses to issue securities and raise capital.

The prospectus exemptions available to companies are primarily set out in the following instruments:

• National Instrument 45-106 Prospectus Exemptions (NI 45-106)
• OSC Rule 45-501 Ontario Prospectus and Registration Exemptions
• Multilateral Instrument 45-108 Crowdfunding

The prospectus exemptions that are used most frequently by start-ups to raise capital include:

• private issuer (section 2.4 of NI 45-106)
• friends, family, and business associates (section 2.6.1 of NI 45-106)
• accredited investor (section 2.3 of NI 45-106)
• Offering memorandum (section 2.9 of NI 45-106)

In many cases, a security sold under a prospectus exemption can only be resold if certain conditions are met. These resale conditions are designed to ensure that there is sufficient disclosure available in the marketplace to allow a subsequent purchaser to make an informed investment decision. For more information on resale restrictions see National Instrument 45-102 Resale of Securities.

Related publications

The following resources can help you compare the different capital raising exemptions that are available in Ontario:

• Summary of Key Capital Raising Prospectus Exemptions in Ontario
• Raising Capital: A primer for small and medium sized enterprises