OSC announces next steps in exempt market review

For Immediate Release OSC

TORONTO – The Ontario Securities Commission (OSC) today published OSC Notice 45-712 Progress Report on Review of Prospectus Exemptions to Facilitate Capital Raising, which sets out the next steps in the OSC’s exempt market review and consideration of four prospectus exemptions. The objective of this work is to facilitate capital raising for start-ups and small and medium-sized enterprises (SMEs) and to modernize Ontario’s exempt market regulatory regime, while adequately protecting investors.

After reviewing feedback from a broad range of stakeholders, the OSC has determined to consider further the following capital raising prospectus exemptions:
      • a crowdfunding exemption;
      • a family, friends and business associates exemption;
      • an offering memorandum exemption; and
      • a streamlined version of the existing rights offering exemption currently available across Canada.

“The exempt market plays an important role in Ontario’s capital markets, especially for start-ups and SMEs,” said Howard Wetston, Q.C., Chair and CEO of the OSC. “It is important as a securities regulator that our continued work in this area promotes an exempt market that is innovative and globally competitive and that facilitates capital raising while protecting investors.”

This work is a priority for the OSC and any resulting proposals will be brought to the public for comment before making any final decisions.

Capital raising prospectus exemptions under consideration

  1. Crowdfunding exemption - Develop a crowdfunding regulatory framework with a particular focus on investing through online funding portals.
  2. Family, friends and business associates exemption - Consider a version of the family, friends and business associates exemption currently available in other Canadian jurisdictions with conditions that could mitigate any concerns identified with the existing exemption.
  3. Offering memorandum exemption - Propose an offering memorandum exemption that is substantially harmonized with the existing model available in Alberta and certain other Canadian jurisdictions, while considering whether there is a need for additional measures to protect investors.
  4. Exemptions based on existing security holder base - Consider whether the existing rights offering exemption could be streamlined to improve its efficiency and effectiveness.

Work completed to date:

  • Published a Consultation Paper, which resulted in 102 comment letters, to consider concept ideas for new capital raising prospectus exemptions.
  • Solicited stakeholder feedback through a variety of channels, including public and targeted consultation sessions.
  • Investor survey: commissioned research on retail investor interest in investing in start-ups and SMEs, including through crowdfunding.
  • Established an ad hoc Exempt Market Advisory Committee to advise on possible regulatory approaches to the exempt market.
  • Considered the experience of other Canadian jurisdictions with prospectus exemptions not currently available in Ontario, as well as international developments relevant to capital raising in the exempt market.

Exempt market quick facts (2012):

  • The total amount of capital raised in Ontario increased by 20 per cent to approximately $104 billion (2011: $87 billion). Of this amount, approximately $37 billion was raised by issuers other than investment funds.
  • The accredited investor exemption accounted for approximately $94 billion or 90 per cent of the total capital raised in Ontario’s exempt market - most used prospectus exemption. (2011: $73 billion).
  • Approximately $7 billion was raised under the minimum amount prospectus exemption (2011: $4 billion).

The OSC is the regulatory body responsible for overseeing Ontario’s capital markets. The OSC administers and enforces Ontario’s securities and commodity futures laws. Its mandate is to provide protection to investors from unfair, improper or fraudulent practices and to foster fair and efficient capital markets and confidence in capital markets.



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