CSA Notice of Publication of

Multilateral Instrument 45-108 Crowdfunding

 

November 5, 2015

 

Introduction

The securities regulatory authorities in Manitoba, Ontario, Québec, New Brunswick and Nova Scotia (collectively, the participating jurisdictions or we) are publishing in final form Multilateral Instrument 45-108 Crowdfunding (MI 45-108 or the Rule), which includes a crowdfunding prospectus exemption (the crowdfunding exemption) and a registration framework for funding portals (funding portals) (collectively, the 45-108 crowdfunding regime). We are also making consequential amendments to other rules (the consequential amendments).

 

The Financial and Consumer Affairs Authority (FCAA) of Saskatchewan, which worked with the participating jurisdictions on the Rule, will be republishing MI 45-108 for a 60 day comment period.

 

The participating jurisdictions have coordinated their efforts in finalizing the 45-108 crowdfunding regime. In some jurisdictions, Ministerial approvals are required for the implementation of the 45-108 crowdfunding regime. Where applicable, Annex D provides information about each participating jurisdiction’s approval process.

 

Provided all necessary Ministerial approvals are obtained, MI 45-108 will come into force in the participating jurisdictions on January 25, 2016.

 

Substance and purpose of the 45-108 crowdfunding regime

As securities regulators, we have the responsibility to examine whether securities law contributes to the efficient functioning of our capital markets, while maintaining adequate investor protection. This includes assessing whether the securities regulatory framework remains responsive and relevant in a dynamic environment that is being shaped by advances in technology and a broad array of demographic, cultural and economic forces.The internet and social media have enabled start-ups and technology companies that foster innovation to reach out to a large number of investors, including retail investors (the crowd), to raise capital.

 

Selling securities over the internet to a large number of investors, sometimes referred to as “crowdfunding”, has emerged as a new way for some businesses, particularly start-ups and small and medium-sized enterprises (SMEs), to access capital that would not have otherwise been accessible. “Crowdfunding” is an umbrella term used to capture many forms of capital and fund raising, that in this context, we mean raising capital from members of the public through the distribution/sale of securities.  Crowdfunding may enable issuers to raise capital more effectively and at a lower cost while also providing investors with greater access to investment opportunities. The 45-108 crowdfunding regime is intended to leverage the use of the internet and social media to facilitate capital formation primarily for start-ups and SMEs that foster innovation and to provide new investment opportunities for investors. At the same time, we believe the 45-108 crowdfunding regime maintains an appropriate level of investor protection and regulatory oversight to be responsive both to global market developments in this area and to our mandate to provide protection to investors.

 

The 45-108 crowdfunding regime will enable start-ups and SMEs in their early-stages of development to raise capital online from a large number of investors through a single registered funding portal. A limit on the total amount that can be raised will be imposed on issuers and investors will be subject to investment limits as a means of limiting their exposure to a highly risky investment. The registration of the funding portal is a key investor protection measure as registration addresses, among other things, potential integrity concerns that may apply to funding portals and the persons operating them, as well as potential concerns relating to conflicts of interest and self-dealing.

 

We believe the introduction of the 45-108 crowdfunding regime is a significant step in enhancing capital raising alternatives in Canada, particularly for start-ups and SMEs. The introduction of the 45-108 crowdfunding regime in the participating jurisdictions will allow start-ups and SMEs to benefit from greater access to capital from investors that was previously limited.

 

The 45-108 crowdfunding regime encompasses measures which are intended to provide effective protection for investors, including:

 

Type of security	•         issuers can only offer non-complex securities
Investment limits	•                  investors are subject to the following investment limits: o    an investor that does not qualify as an accredited investor: ▪  $2,500 per investment, and ▪  in Ontario, $10,000 in total in a calendar year, o   an accredited investor other than a permitted client: ▪  $25,000 per investment, and ▪  in Ontario, $50,000 in total in a calendar year, o   in Ontario, no investment limits for a permitted client
Offering document	•                  issuers are required to prepare an offering document that contains all of the information about the issuer and its business that an investor should know before purchasing the issuer’s securities
Risk acknowledgement form (RAF)	•                  investors must complete a RAF requiring them to positively confirm having read and understood the risk warnings and information in the crowdfunding offering document before they can enter into an agreement to purchase securities
Liability for materials	•                  issuers are accountable for and are subject to a standard of liability on the crowdfunding offering document and other permitted materials, and investors are provided with a related right of action
Advertising and solicitation	•                  a prohibition on advertising and general solicitation
Ongoing disclosure	•                  non-reporting issuers must make available to investors (i) annual financial statements, (ii) a notice of use of proceeds, and (iii) in New Brunswick, Nova Scotia and Ontario, a notice of a discontinuation of the issuer’s business, a change in the issuer’s industry or a change of control of the issuer •                  reporting issuers must continue to comply with all of their disclosure requirements
Registered funding portal	•                  issuers can only distribute securities through a single funding portal that is registered as an investment dealer, exempt market dealer or restricted dealer as outlined in the Rule, and must post the offering document and other permitted materials solely on that funding portal’s online platform
Funding portal requirements	•                  funding portals are prohibited from offering securities of a related issuer •                  a funding portal must fulfill certain gatekeeper responsibilities prior to allowing an issuer access to its online platform, including reviewing the issuer’s disclosure in the crowdfunding offering document and other permitted materials for completeness, accuracy and any misleading statements •                  a funding portal must review information and obtain background checks on the issuer and its directors, executive officers and promoters, and deny an issuer access to the funding portal in certain circumstances

 

We note that the use of the internet for raising capital is not restricted to crowdfunding as defined in the 45-108 crowdfunding regime. Many online platforms today are used to raise capital under other prospectus exemptions such as the accredited investor exemption.

 

Background

On March 20, 2014, the securities regulatory authorities of Saskatchewan, Manitoba, Québec, New Brunswick and Nova Scotia published a Notice of Publication and Request for Comment on two different crowdfunding prospectus exemption regimes:

•         the start-up crowdfunding registration and prospectus exemptions (the start-up crowdfunding exemptions); and

•         the proposed 45-108 crowdfunding regime.

 

The proposed 45-108 crowdfunding regime was also published on March 20, 2014 (the March 2014 45-108 materials) in a Notice and Request for Comment by the Ontario Securities Commission (OSC), as part of a broad review of the exempt market that would, among other things, introduce four new prospectus exemptions for issuers other than investment funds. 

 

The securities regulatory authorities of British Columbia, Saskatchewan, Manitoba, Québec, New Brunswick and Nova Scotia have implemented the start-up crowdfunding exemptions by way of local blanket orders on May 14, 2015. The 45-108 crowdfunding regime and the start-up crowdfunding exemptions are viewed by those jurisdictions (except for British Columbia, which is not a jurisdiction participating in the 45-108 crowdfunding regime) as complementary regimes, as the 45-108 crowdfunding regime is available to both reporting and non-reporting issuers and provides both higher investment limits for investors and higher limits on the amount issuers can raise.

 

Summary of written comments received by the participating jurisdictions

The comment period for the March 2014 45-108 materials ended on June 18, 2014. The participating jurisdictions collectively received 70 written submissions. We have considered the comments received and thank all of the commenters for their input.

 

Comment letters received by the following jurisdictions can be viewed on their websites as noted:

 

• OSC - www.osc.gov.on.ca
• AMF - www.lautorite.qc.ca/en

 

A summary of the comments submitted to the OSC, together with the responses of OSC staff, is contained in Annex F.

 

A summary of the general themes raised in the comment letters that were received across the participating jurisdictions is set out under the heading “Key themes from the comment letters” below.

 

Key themes from the comment letters

There were several key themes expressed throughout the comment letters submitted to us. Below is a summary of these key themes.

 

Investor protection

A significant number of commenters raised concerns related to investor protection. Many of the commenters noted the high probability that investors would lose their entire investment in a start-up or a SME because these businesses typically have low survival rates and there are often issues related to corporate governance, insider trading and integrity concerns.

 

Some of the commenters further noted that unsophisticated investors are particularly vulnerable in a crowdfunding investment environment. Particular concerns expressed included:

• investors lack the requisite expertise, skills and experience to invest in a crowdfunded offering,
• investors are unfamiliar with start-up investing principles and the risks particular to start-ups and SMEs,
• investors lack sufficient information to make appropriate investment decisions due to the low level of disclosure required of non-reporting issuers under the crowdfunding exemption,
• there will be limited access to ongoing information about a start-up or SME that is a non-reporting issuer,

•     investors do not understand and appreciate the restrictions on their ability to resell the shares they purchase, and

•    the risk of fraud in a crowdfunding environment, particularly given the increased access of unsophisticated investors to private markets that the exemption would provide and the broad reach afforded by the internet.

 

As we expand accessibility to the exempt market through crowdfunding, we recognize that investor protection measures are an important component of the framework and we will remain vigilant in monitoring the adequacy of the protection it affords investors. We believe the 45-108 crowdfunding regime we are introducing will provide greater access to capital for start-ups and SMEs and that the framework we are adopting, including the measures noted above, will provide effective protection for investors.

 

Investment limits

The March 2014 45-108 materials included proposed investment limits for all investors: a $2,500 limit per investment and a $10,000 limit for all investments made by an investor under the crowdfunding exemption in a calendar year. A large number of commenters expressed a range of opinions about the proposed investment limits.

 

One group of commenters thought the proposed investment limits would frustrate the 45-108 crowdfunding regime’s objectives of facilitating capital raising for start-ups and SMEs, would interfere with investors’ ability to pursue their investment objectives, and would not provide meaningful investor protection.

 

Another group of commenters recommended that the dollar amount of the investment limits be reduced for investors. The commenters pointed to the concept of crowdfunding being based on small investments made by a broad pool of investors and the limited amount of funds Canadians have available to invest annually as evidenced by published economic data. The commenters argued that lower investment limits would discourage over-concentration by unsophisticated investors in a risky class of investments.

 

Several commenters supported removing or increasing investment limits for accredited investors. The arguments in support of this position generally pertained to the relatively high level of sophistication such investors possess and their ability to retain advice and withstand loss.

 

We continue to believe that investment limits are a necessary and appropriate investor protection tool that can help to reduce the risk associated with an investment in securities under the crowdfunding exemption, while still facilitating capital-raising by start-ups and SMEs. However, in light of the feedback received, we considered different approaches to investment limits under the crowdfunding exemption and have made changes to the investment limits that were proposed in the March 2014 45-108 materials.

 

Financial statement assurance requirements for non-reporting issuers and other financial disclosure

Several commenters provided feedback regarding the proposed assurance requirements for the financial statements of a non-reporting issuer that distributes securities in reliance on the crowdfunding exemption. The commenters’ recommendations on non-reporting issuers’ financial statements included a mandatory audit, a review being sufficient and a tiered approach to assurance requirements.

 

We continue to support a tiered approach to financial statement assurance requirements. After considering the comments, we have simplified and raised the thresholds based on the amount an issuer has raised under one or more prospectus exemptions since its formation. As such, a non-reporting issuer’s financial statements will be required to be:

•    audited or reviewed by a public accounting firm if the cumulative amount an issuer has raised under prospectus exemptions since its formation is $250,000 or more but is less than $750,000, or

•    audited if the cumulative amount an issuer has raised under prospectus exemptions since its formation is $750,000 or more.

 

We think these thresholds strike an appropriate balance between providing investors with reliable financial information and not imposing a disproportionate financial burden on start-ups and SMEs that have limited financial resources to pursue their business.

 

Offering limit

Several commenters expressed views about the proposed $1.5 million limit on the aggregate amount that could be raised by an issuer group under the crowdfunding exemption. Although several commenters supported the proposed limit, an equal number of commenters thought the limit should be higher.

 

We maintain that a limit of $1.5 million is appropriate. The focus of the crowdfunding exemption is to facilitate capital raising by start-ups and SMEs, and the proposed limit is commensurate with the capital needs of issuers at this stage of development. There are other prospectus exemptions available to address the needs of issuers at more advanced stages of development.

 

Funding portal registration in other registration categories and use of the crowdfunding exemption

Many commenters disagreed with the prohibition on a funding portal against being registered in another registration category and suggested other registrants should be allowed to use the crowdfunding exemption. These commenters noted that registrants in other categories would have the experience and expertise to perform the work and comply with requirements in the Rule. They also noted that this restriction would increase complexity and costs for an issuer raising funds under multiple prospectus exemptions, and limiting funding portals to one prospectus exemption would prevent funding portals from being economically viable.

 

We considered the comments received and amended the March 2014 45-108 materials to permit registered dealers, such as investment dealers and exempt market dealers, to use the crowdfunding exemption. However, these registered dealers will need to comply with all of the requirements applicable to their registration category, including performing specific know-your-client and know-your product due diligence on the issuers, in addition to the requirements applicable to a funding portal as set out in the Rule.

 

However, a funding portal registered as a restricted dealer is a specialized type of restricted dealer that can only rely on the crowdfunding exemption to facilitate distributions of simple securities and their review of issuers will be limited in comparison to the know-your-product obligations of investment dealers and exempt market dealers relying on the crowdfunding exemption. In light of the limited activities of the restricted dealer funding portal, they will not be required to conduct a suitability assessment for the investor and will not assess the merits or expected returns of an investment. Rather, the restricted dealer funding portal will provide a gatekeeper role focused on compliance by issuers with the requirements of the Rule. Considering the limited activities of the restricted dealer funding portal, we continue to believe a funding portal that is registered as a restricted dealer in accordance with the Rule should not be registered in any other registration category, and, in Ontario, should not be affiliated with another registered firm. 

 

Custodial requirements – holding, handling or having access to purchaser funds or assets

Many commenters expressed an opinion on the restriction on holding, handling, or having access to client funds or securities by funding portals.

 

We acknowledge these comments and agree that client funds and assets would be better protected if they were held by the funding portal that is subject to capital and insurance requirements.  We have amended the March 2014 45-108 materials so that a funding portal registered in the category of restricted dealer will be permitted to hold, handle, control or have access to purchaser funds provided the restricted dealer funding portal maintains the minimum capital requirement and fidelity bond insurance requirements equivalent to an exempt market dealer. Funding portals that are registered as exempt market dealers and investment dealers will be required to comply with the capital and insurance requirements applicable to their registration category and where applicable, as required by the Investment Industry Regulatory Organization of Canada.

 

Advertising and solicitation

The March 2014 45-108 materials proposed that all relevant information about a crowdfunding offering would be required to be made available only on the funding portal’s online platform through which the distribution was to be made and not on any other website. An issuer could inform potential investors that the issuer was proposing to offer its securities under the crowdfunding exemption and refer the potential investors to the online platform of the funding portal for more information.

 

Commenters generally supported, or did not believe it was inappropriate to have, reasonable restrictions on advertising and solicitation by funding portals and issuers relying on the crowdfunding exemption. However, some commenters disagreed with the restrictions on advertising and solicitation by funding portals and issuers. They felt that limiting avenues or channels through which investors receive information or advertisements about an investment opportunity would be a detriment to an issuer seeking capital and to investors seeking as much information as possible about a potential investment. These commenters suggested that other means of communication, such as e-mail, text, or verbal communications, should also be permitted.

 

We note that an issuer is permitted to inform potential investors of its offering on the funding portal’s online platform and may use any form of communication (e.g., text, email or posters) it chooses to direct potential investors to the funding portal’s online platform. We continue to believe that all materials pertaining to a crowdfunding offering (including terms sheets and videos) should only be made available to potential investors on the funding portal’s online platform for ease of investor reference and to facilitate the exchange of information and views that is conducive to eliciting the “wisdom of the crowd”. This will also allow the funding portal to ensure that all materials of the issuer are consistent with the crowdfunding offering document and comply with the requirements on advertising and solicitation.

 

The funding portal is able to advertise its business. For example, it can advertise the fact that crowdfunding offerings could be made through the funding portal and the fact that information about such offerings would be posted on its online platform.

 

Changes to the March 2014 45-108 materials

After considering the comments received and consultations with stakeholders, we have made some changes to the proposal that was published for comment. We do not consider the changes made since the publication for comment to be material and therefore are not republishing the 45-108 crowdfunding regime for a further comment period.

 

Annex C contains a summary of notable changes between the March 2014 45-108 materials published for comment and the final publication.

 

Consequential amendments

National amendments

We are making consequential amendments to the following instrument:

•         National Instrument 45-102 Resale of Securities so that securities distributed under the crowdfunding exemption are subject to a “restricted period” on resale.

 

In Québec, the consequential amendment to National Instrument 45-102 Resale of Securities are published for comment for a 30-day comment period. The consequential amendment is intended to come into force in Québec at the same time MI 45-108 comes into force on January 25, 2016.

 

Local amendments

Any changes to local rules or policies will be identified in a local notice, where applicable.

 

Local notices

Annex D is being published in any local jurisdiction that is making related changes to local securities laws and sets out any additional information that is relevant to that jurisdiction only.

 

Questions

Please refer your questions to any of:

 

Ontario Jo-Anne Matear Manager, Corporate Finance Ontario Securities Commission 416-593-2323 jmatear@osc.gov.on.ca	Rick Whiler Senior Accountant, Corporate Finance Ontario Securities Commission 416-593-8127 rwhiler@osc.gov.on.ca
Erin O’Donovan Senior Legal Counsel, Corporate Finance Ontario Securities Commission 416-593-8973 eodonovan@osc.gov.on.ca             Marah Smith Legal Counsel, Corporate Finance Ontario Securities Commission 416-204-8969 msmith@osc.gov.on.ca	Denise Morris Senior Legal Counsel, Compliance and Registrant Regulation Ontario Securities Commission 416-595-8785 dmorris@osc.gov.on.ca           Gloria Tsang Legal Counsel, Compliance and Registrant Regulation Ontario Securities Commission 416-593-8263 gtsang@osc.gov.on.ca
Manitoba Chris Besko Director, General Counsel The Manitoba Securities Commission 204-945-2561 Chris.Besko@gov.mb.ca
Québec Patrick Théorêt Director, Corporate Finance  Autorité des marchés financiers 514-395-0337, ext. 4381 patrick.theoret@lautorite.qc.ca   Marc-Olivier St-Jacques Analyst, Corporate Finance Autorité des marchésfinanciers 514-395-0337, ext. 4424    marco.st-jacques@lautorite.qc.ca	Gabriel Araish Senior Analyst, Corporate Finance Autorité des marchés financiers 514-395-0337, ext. 4414 gabriel.araish@lautorite.qc.ca   Noémie Corneau-Girard Analyst, Firms Registration Autorité des marchés financiers 514-395-0337, ext. 4806 noemie.corneau-girard@lautorite.qc.ca
New Brunswick Susan Powell Deputy Director, Securities Financial and Consumer Services Commission 506-643-7697 susan.powell@fcnb.ca	Jason Alcorn Legal Counsel, Securities Financial and Consumer Services Commission 506-643-7857 jason.alcorn.fcnb.ca
Nova Scotia Abel Lazarus Senior Securities Analyst, Corporate Finance Nova Scotia Securities Commission 902-424-6859 abel.lazarus@novascotia.ca

 

 

 

Annexes to Notice

 

Annex A – Crowdfunding Regime

A1 Multilateral Instrument 45-108 Crowdfunding

A2 Form 45-108F1 Crowdfunding Offering Document

A3 Form 45-108F2 Risk Acknowledgement

A4 Form 45-108F3 Confirmation of Investment Limits

A5 Form 45-108F4 Notice of Specified Key Events

A6 Form 45-108F5 Personal Information Form and Authorization to Collect, Use and Disclose Personal Information

                  A7 Companion Policy 45-108CP Crowdfunding

Annex B – Amending Instrument for National Instrument 45-102 Resale of Securities

Annex C – Summary of Notable Changes to the March 2014 45-108 Materials

Annex D – Local Matters

Annex E – OSC List of Commenters

Annex F –  OSC Summary of Comments and Responses

           

 

Annex A1   Multilateral Instrument 45-108 Crowdfunding

 

THE MANITOBA SECURITIES COMMISSION
MSC Rule No. 2015-33
(Section 149.1, The Securities Act)

 

MULTILATERAL INSTRUMENT 45-108

CROWDFUNDING

 

TABLE OF CONTENTS

 

Part 1  Definitions and interpretation

1.                   Definitions

2.                   Terms defined or interpreted in other instruments

3.                   Purchaser

4.                   Specifications – Québec

 

Part 2  Crowdfunding prospectus exemption

Division 1: Distribution requirements                                                             

5.                   Crowdfunding prospectus exemption

6.                   Conditions for closing of the distribution

7.                   Certificates

8.                   Right of withdrawal

9.                   Liability for misrepresentation – reporting issuers

10.               Liability for untrue statement – non-reporting issuers

11.               Advertising and general solicitation

12.               Additional distribution materials

13.               Commissions or fees

14.               Restriction on lending

15.               Filing or delivery of distribution materials

 

Division 2: Ongoing disclosure requirements for non-reporting issuers

16.               Annual financial statements

17.               Annual disclosure of use of proceeds

18.               Notice of specified key events

19.               Period of time for providing ongoing disclosure

20.               Books and records

 

Part 3  Requirements for funding portals

Division 1: Registration requirements, general

21.               Restricted dealer funding portal

22.               Registered dealer funding portal

 

Division 2: Registration requirements, funding portals

23.               Restricted dealing activities

24.               Advertising and general solicitation

25.               Access to funding portal

26.               Issuer access agreement

27.               Obligation to review materials of eligible crowdfunding issuer

28.               Denial of issuer access and termination

29.               Return of funds

30.               Notifications

31.               Removal of distribution materials

32.               Monitoring purchaser communications

33.               Online platform acknowledgement

34.               Purchaser requirements prior to purchase

35.               Required online platform disclosure

36.               Delivery to the issuer

37.               Release of funds

38.               Reporting requirements

 

Division 3: Additional requirements, restricted dealer funding portal

39.               Prohibition on providing recommendations or advice

40.               Restriction on referral arrangements

41.               Permitted dealing activities

42.               Chief compliance officer

43.               Proficiency

 

Part 4  Exemption

44.               Exemption

 

Part 5  Coming into force

45.               Effective date

 

 

Appendix A – Signing Requirements for Certificate of a Crowdfunding Offering Document (Section 7)

 

Form 45-108F1 Crowdfunding Offering Document

 

Form 45-108F2 Risk Acknowledgement

 

Form 45-108F3 Confirmation of Investment Limits

 

Form 45-108F4 Notice of Specified Key Events

 

Form 45-108F5 Personal Information Form and Authorization to Collect, Use and Disclose Personal Information

PART 1 – DEFINITIONS AND INTERPRETATION

 

 

Definitions

1.                 In this Instrument

 

"accredited investor" means

 

(a) except in Ontario, an accredited investor as defined in National Instrument 45-106 Prospectus Exemptions, and

 

(b) in Ontario, an accredited investor as defined in subsection 73.3(1) of the the Securities Act, R.S.O. 1990 c. S.5 and in National Instrument 45-106 Prospectus Exemptions;

 

"aggregate minimum proceeds" means the amount disclosed in item 5.2 of the crowdfunding offering document that is sufficient to accomplish the business objectives of the issuer;

 

"Canadian Financial Statement Review Standards" means standards for the review of financial statements by a public accountant determined with reference to the Handbook;

 

"confirmation of investment limits form" means a completed Form 45-108F3 Confirmation of Investment Limits;

 

"crowdfunding offering document" means a completed Form 45-108F1 Crowdfunding Offering Document together with any amendment to that document and any document incorporated by reference therein;

 

"crowdfunding prospectus exemption" means the exemption from the prospectus requirement in section 5 [Crowdfunding prospectus exemption];

 

"distribution period" means the period referred to in the crowdfunding offering document during which an eligible crowdfunding issuer offers its securities to purchasers in reliance on the crowdfunding prospectus exemption;

 

"eligible crowdfunding issuer" means an issuer if all of the following apply:

 

(a) the issuer and, if applicable, its parent are incorporated or organized under the laws of Canada or any jurisdiction of Canada;

 

(b) the head office of the issuer is located in Canada;

 

(c) a majority of the directors of the issuer are resident in Canada;

 

(d) the principal operating subsidiary of the issuer, if any, is incorporated or organized under

 

(i) the laws of Canada or any jurisdiction of Canada, or

 

(ii) the laws of the United States of America or any state or territory of the United States of America or the District of Columbia;

 

(e) the issuer is not an investment fund;

 

"eligible securities" means securities of an eligible crowdfunding issuer having the same price, terms and conditions that are distributed under the crowdfunding prospectus exemption during the distribution period and are any one or more of the following:

 

(a) a common share;

 

(b) a non-convertible preference share;

 

(c) a security convertible into securities referred to in paragraph (a) or (b);

 

(d) a non-convertible debt security linked to a fixed or floating interest rate;

 

(e) a unit of a limited partnership;

 

(f) a flow-through share under the ITA;

 

"executive officer" means an individual who is

 

(a) a chair, vice-chair or president,

 

(b) a chief executive officer or chief financial officer,

 

(c) a vice-president in charge of a principal business unit, division or function including sales, finance or production, or

 

(d) performing a policy-making function in respect of the issuer;

 

"funding portal" means

 

(a) a registered dealer funding portal, or

 

(b) a restricted dealer funding portal;

 

"issuer access agreement" means a written agreement entered into between an eligible crowdfunding issuer and a funding portal in compliance with section 26 [Issuer access agreement];

 

"issuer group" means

 

(a) an eligible crowdfunding issuer,

 

(b) an affiliate of the eligible crowdfunding issuer, and

 

(c) any other issuer

 

(i) that is engaged in a common enterprise with the eligible crowdfunding issuer or with an affiliate of the eligible crowdfunding issuer, or

 

(ii) that is controlled, directly or indirectly, by the same person or company or persons or companies that control, directly or indirectly, the eligible crowdfunding issuer;

 

"permitted client" means a permitted client as defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations;

 

"personal information form" means a completed Form 45-108F5 Personal Information Form and Authorization to Collect, Use and Disclose Personal Information;

 

"registered dealer funding portal" means a person or company that

 

(a) is registered in the category of investment dealer or exempt market dealer under National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations, and

 

(b) acts or proposes to act as an intermediary in a distribution of eligible securities through an online platform in reliance on the crowdfunding prospectus exemption;

 

"restricted dealer funding portal" means a person or company that

 

(a) is registered in the category of restricted dealer under National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations,

 

(b) is authorized under the terms and conditions of its restricted dealer registration to distribute securities under this Instrument,

 

(c) acts or proposes to act as an intermediary in a distribution of eligible securities through an online platform in reliance on the crowdfunding prospectus exemption,

 

(d) is not registered in any other registration category, and

 

(e) in Ontario, is not an affiliate of another registered dealer, registered adviser, or registered investment fund manager;

 

"right of withdrawal" means the right referred to in section 8 [Right of withdrawal] or a comparable right described in securities legislation of the jurisdiction in which the purchaser resides;

 

"risk acknowledgement form" means a completed Form 45-108F2 Risk Acknowledgement;

 

"SEC issuer" means an SEC issuer as defined in National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards;

 

"U.S. AICPA Financial Statement Review Standards" means the standards of the American Institute of Certified Public Accountants for a review of financial statements by a public accountant, as amended from time to time.

 

Terms defined or interpreted in other instruments

2.(1)                 Unless otherwise defined herein, in Part 2 [Crowdfunding prospectus exemption], each term has the meaning ascribed, or interpretation given, to it in National Instrument 45-106 Prospectus Exemptions.

 

2.(2)                 Unless otherwise defined herein, in Part 3 [Requirements for funding portals], each term has the meaning ascribed, or interpretation given, to it in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations.

 

Purchaser

3.                     References to a "client" in a provision of any instrument with which a funding portal is required to comply under Part 3 [Requirements for funding portals], must be read as if the references are to a "purchaser".

 

 

Specifications – Québec

4.(1)                 In Québec, "trade" in this Instrument refers to any of the following activities:

 

(a) the activities described in the definition of "dealer" in section 5 of the Securities Act (chapter V-1.1), including the following activities:

 

(i) the sale or disposition of a security by onerous title, whether the terms of payment be on margin, installment or otherwise, but does not include a transfer or the giving in guarantee of securities in connection with a debt or the purchase of a security, except as provided in paragraph (b);

 

(ii) participation as a trader in any transaction in a security through the facilities of an exchange or a quotation and trade reporting system;

 

(iii) the receipt by a registrant of an order to buy or sell a security;

 

(b) a transfer or the giving in guarantee of securities of an issuer from the holdings of a control person in connection with a debt.

 

4.(2)                 In Québec, the crowdfunding offering document and materials that are made available to purchasers by a reporting issuer in accordance with this Instrument are documents authorized by the Autorité des marchés financiers for use in lieu of a prospectus.

 

4.(3)                 In Québec, the crowdfunding offering document and materials that are made available to purchasers in accordance with this Instrument must be drawn up in French only or in French and English.

 

 

PART 2 – CROWDFUNDING PROSPECTUS EXEMPTION

 

 

Division 1: Distribution requirements

 

Crowdfunding prospectus exemption

5.(1)                 The prospectus requirement does not apply to a distribution by an eligible crowdfunding issuer of an eligible security of its own issue to a person or company that purchases the security as principal if all of the following apply:

 

(a) the issuer offers the securities during the distribution period and the distribution period ends no later than 90 days after the date the issuer first offers its securities to purchasers;

 

(b) the total proceeds raised by the issuer group in reliance on the crowdfunding prospectus exemption does not exceed $1,500,000 within the 12–month period ending on the last day of the distribution period;

 

(c) in Ontario, the acquisition cost of the securities acquired by the purchaser

 

(i) in the case of a purchaser that is not an accredited investor, does not exceed

 

(A) $2,500 for the distribution, and

 

(B) $10,000 for all distributions in reliance on the crowdfunding prospectus exemption in the same calendar year,

 

 

(ii) in the case of a purchaser that is an accredited investor that is not a permitted client, does not exceed

 

(A) $25,000 for the distribution, and

 

(B) $50,000 for all distributions in reliance on the crowdfunding prospectus exemption in the same calendar year, and

 

(iii) in the case of a purchaser that is a permitted client, is not limited;

 

(d) except in Ontario, the acquisition cost of the securities acquired by the purchaser

 

(i) in the case of a purchaser that is not an accredited investor, does not exceed $2,500 for the distribution, and

 

(ii) in the case of a purchaser that is an accredited investor, does not exceed $25,000 for the distribution;

                                                                                          

(e) the issuer distributes the securities through a single funding portal;

 

(f) before the purchaser enters into an agreement to purchase the securities, the issuer makes available to the purchaser, through the funding portal, a crowdfunding offering document that is in compliance with

 

(i) section 7 [Certificates] and section 8 [Right of withdrawal], and

 

(ii) section 9 [Liability for misrepresentation – reporting issuers] or section 10 [Liability for untrue statement – non-reporting issuers], as applicable.

 

5.(2)                 The crowdfunding prospectus exemption is not available if any of the following apply:

 

(a) the proceeds of the distribution are used by the issuer to invest in, merge with or acquire an unspecified business;

 

(b) the issuer is not a reporting issuer, and the issuer previously distributed securities in reliance on the crowdfunding prospectus exemption and is not in compliance with any of the following:

 

(i) section 15 [Filing or delivery of distribution materials];

 

(ii) section 16 [Annual financial statements];

 

(iii) section 17 [Annual disclosure of use of proceeds];

 

(iv) section 19 [Period of time for providing ongoing disclosure];

 

(v) section 20 [Books and records];

 

(vi) in New Brunswick, Nova Scotia and Ontario, section 18 [Notice of specified key events];

 

(c) the issuer is a reporting issuer and is not in compliance with its reporting obligations under securities legislation, including under this Instrument;

 

(d) the issuer has previously commenced a distribution under this section and that distribution has not closed, been withdrawn or otherwise terminated.

 

Conditions for closing of the distribution

6.                     A distribution in reliance on the crowdfunding prospectus exemption must not close unless

 

(a) the right of withdrawal has expired,

 

(b) the aggregate minimum proceeds have been raised through one or both of the following:

 

(i) the distribution;

 

(ii) any concurrent distributions by any member of the issuer group, provided that the proceeds from those distributions are unconditionally available to the eligible crowdfunding issuer at the time of closing of the distribution,

 

(c) the issuer has provided to the funding portal written confirmation of the proceeds of the concurrent distributions referred to in subparagraph (b)(ii), if any,

 

(d) the issuer has received

 

(i) the purchase agreement entered into between the issuer and the purchaser,

 

(ii) a risk acknowledgement form for the purchaser where the purchaser positively confirms having read and understood the risk warnings and the information in the crowdfunding offering document,

 

(iii) except in Ontario, confirmation and validation that the purchaser is an accredited investor if the acquisition cost is greater than $2,500, and

 

(iv) in Ontario, a confirmation of investment limits form for the purchaser, and

 

(e) the closing occurs within 30 days of the end of the distribution period.

 

Certificates

7.(1)                 A crowdfunding offering document made available under paragraph 5(1)(f) [Crowdfunding prospectus exemption] must contain a certificate executed by the issuer in accordance with the applicable provisions of Appendix A, which

 

(a) if the issuer is a reporting issuer, states that "This crowdfunding offering document does not contain a misrepresentation. Purchasers of securities have a right of action in the case of a misrepresentation.", or

 

(b) if the issuer is not a reporting issuer, states that "This crowdfunding offering document does not contain an untrue statement of a material fact. Purchasers of securities have a right of action in the case of an untrue statement of a material fact."

 

7.(2)                 A certificate under subsection (1) must be true as at the date the certificate is signed, the date the crowdfunding offering document is made available to purchasers and the time of the closing of the distribution.

 

7.(3)                 If a certificate under subsection (1) ceases to be true after a crowdfunding offering document is made available to a purchaser, the issuer must

 

(a) amend the crowdfunding offering document and provide a newly dated certificate executed by the issuer in accordance with the applicable provisions of Appendix A, and

 

(b) provide the amended crowdfunding offering document to the funding portal for the purpose of making it available to purchasers.

 

Right of withdrawal

8.                     If the securities legislation of the jurisdiction in which a purchaser resides does not provide a comparable right, the crowdfunding offering document made available to the purchaser under paragraph 5(1)(f) [Crowdfunding prospectus exemption] must provide the purchaser with a contractual right to withdraw from any agreement to purchase the security by delivering a notice to the funding portal within 48 hours after the date of the agreement to purchase and any subsequent amendment to the crowdfunding offering document.

 

Liability for misrepresentation – reporting issuers

9.                     If the securities legislation of the jurisdiction in which a purchaser resides does not provide a comparable right, the crowdfunding offering document of a reporting issuer, made available to the purchaser under paragraph 5(1)(f) [Crowdfunding prospectus exemption], must provide a contractual right of action against the issuer for rescission and damages that

 

(a) is available to the purchaser if the crowdfunding offering document or other materials made available to the purchaser contain a misrepresentation, without regard to whether the purchaser relied on the misrepresentation,

 

(b) is enforceable by the purchaser delivering a notice to the issuer

 

(i) in the case of an action for rescission, within 180 days after the date of purchase by the purchaser, or

 

(ii) in the case of an action for damages, before the earlier of

 

(A) 180 days after the purchaser first has knowledge of the facts giving rise to the cause of action, or

 

(B) 3 years after the date of purchase,

 

(c) is subject to the defence that the purchaser had knowledge of the misrepresentation,

 

(d) in the case of an action for damages, provides that the amount recoverable

 

(i) does not exceed the price at which the security was distributed, and

 

(ii) does not include all or any part of the damages that the issuer proves do not represent the depreciation in value of the security resulting from the misrepresentation, and

 

(e) is in addition to, and does not detract from, any other right of the purchaser.

 

Liability for untrue statement – non-reporting issuers

10.                    The crowdfunding offering document of an issuer that is not a reporting issuer, made available to a purchaser under paragraph 5(1)(f) [Crowdfunding prospectus exemption], must provide a contractual right of action against the issuer for rescission and damages that

 

(a) is available to the purchaser if the crowdfunding offering document or other materials made available to the purchaser contain an untrue statement of a material fact, without regard to whether the purchaser relied on the statement,

 

(b) is enforceable by the purchaser delivering a notice to the issuer

 

(i) in the case of an action for rescission, within 180 days after the date of purchase by the purchaser, or

(ii) in the case of an action for damages, before the earlier of

 

(A) 180 days after the purchaser first has knowledge of the facts giving rise to the cause of action, or

 

(B) 3 years after the date of purchase,

 

(c) is subject to the defence that the purchaser had knowledge of the untrue statement of a material fact,

(d) in the case of an action for damages, provides that the amount recoverable

 

(i) does not exceed the price at which the security was distributed, and

 

(ii) does not include all or any part of the damages that the issuer proves do not represent the depreciation in value of the security resulting from the untrue statement of a material fact, and

 

(e) is in addition to, and does not detract from, any other right of the purchaser.

 

Advertising and general solicitation

11.(1)               An issuer must not, directly or indirectly, advertise a distribution, or solicit purchasers, under the crowdfunding prospectus exemption.

 

11.(2)               Despite subsection (1), the issuer may inform purchasers that it proposes to distribute securities under the crowdfunding prospectus exemption and may refer purchasers to the funding portal facilitating the distribution.

 

Additional distribution materials

12.(1)               In addition to the crowdfunding offering document required to be made available to a purchaser under paragraph 5(1)(f) [Crowdfunding prospectus exemption], an issuer may make available to a purchaser only through the funding portal the following materials:

 

(a) a term sheet;

 

(b) a video;

 

(c) other materials summarizing the information in the crowdfunding offering document.

 

12.(2)               The materials referred to in subsection (1) must be consistent with the information in the crowdfunding offering document.

 

12.(3)               If an amended crowdfunding offering document is made available to purchasers, all materials made available to purchasers under this section must be amended, if necessary, and made available to purchasers through the funding portal.

 

Commissions or fees

13.                    No person or company in the issuer group or director or executive officer of an issuer in the issuer group may, directly or indirectly, pay a commission, finder's fee, referral fee or similar payment to any person or company in connection with a distribution in reliance on the crowdfunding prospectus exemption, other than to a funding portal.

 

Restriction on lending

14.                    No person or company in the issuer group or director or executive officer of an issuer in the issuer group may, directly or indirectly, lend or finance, or arrange lending or financing, for a purchaser to purchase securities of the issuer under the crowdfunding prospectus exemption.

Filing or delivery of distribution materials

15.(1)               An issuer must, no later than 10 days after the closing of the distribution, file with the securities regulatory authority or regulator Form 45-106F1 Report of Exempt Distribution.

 

15.(2)               At the same time that the issuer files the form referred to in subsection (1), the issuer must file a copy of the crowdfunding offering document and the materials referred to in paragraphs 12(1)(a) and (c) [Additional distribution materials].

 

15.(3)               Upon request, the issuer must deliver to the securities regulatory authority or regulator any video referred to in paragraph 12(1)(b) [Additional distribution materials].

 

Division 2: Ongoing disclosure requirements for non-reporting issuers

 

Annual financial statements

16.(1)               An issuer that is not a reporting issuer that has distributed securities under the crowdfunding prospectus exemption must deliver to the securities regulatory authority or regulator and make reasonably available to each purchaser, within 120 days after the end of its most recently completed financial year, the financial statements listed in paragraphs 4.1(1)(a), (b), (c) and (e) [Comparative annual financial statements and audit] of National Instrument 51-102 Continuous Disclosure Obligations.

 

16.(2)               The financial statements referred to in subsection (1) must

 

(a) be approved by management of the issuer and be accompanied by

 

(i) a review report or auditor’s report if the amount raised by the issuer under one or more prospectus exemptions from the date of the formation of the issuer until the end of its most recently completed financial year, is $250,000 or more but is less than $750,000, or

 

(ii) an auditor’s report if the amount raised by the issuer under one or more prospectus exemptions from the date of the formation of the issuer until the end of its most recently completed financial year, is $750,000 or more,

 

(b) comply with paragraph 3.2(1)(a) [Acceptable accounting principles – general requirements], subparagraph 3.2(1)(b)(i) [Acceptable accounting principles – general requirements], and subsection 3.2(5) [Acceptable accounting principles – general requirements] of National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards, and

 

(c) comply with section 3.5 [Presentation and functional currencies] of National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards.

 

16.(3)               If the financial statements referred to in subsection (1) are accompanied by a review report, the financial statements must be reviewed in accordance with Canadian Financial Statement Review Standards and the review report must

 

(a) not include a reservation or modification,

 

(b) identify the financial periods that were subject to review,

 

(c) be in the form specified by Canadian Financial Statement Review Standards, and

 

(d) refer to IFRS as the applicable financial reporting framework.

 

16.(4)   If the financial statements referred to in subsection (1) are accompanied by an auditor’s report, the auditor’s report must be

(a) prepared in accordance with section 3.3 [Acceptable auditing standards – general requirements] of National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards, and

(b) signed by an auditor that complies with section 3.4 [Acceptable auditors] of National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards.

 

16.(5)               If the financial statements referred to in subsection (1) are those of an SEC issuer,

 

(a) the financial statements may be prepared in accordance with section 3.7 [Acceptable accounting principles for SEC issuers] of National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards,

 

(b) the financial statements may be reviewed in accordance with U.S. AICPA Financial Statement Review Standards and accompanied by a review report prepared in accordance with U.S. AICPA Financial Statement Review Standards that

 

(i) does not include a modification or exception,

 

(ii) identifies the financial periods that were subject to review,

 

(iii) identifies the review standards used to conduct the review and the accounting principles used to prepare the financial statements, and

 

(iv) refers to IFRS as the applicable financial reporting framework if the financial statements comply with paragraph 3.2(1)(a) [Acceptable accounting principles – general requirements] of National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards, and

 

(c) the financial statements may be audited in accordance with section 3.8 [Acceptable auditing standards for SEC issuers] of National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards.

 

16.(6)               If the financial statements referred to in subsection (5) are accompanied by a review report and the statements have been reviewed in accordance with Canadian Financial Statement Review Standards, the review report must be in compliance with paragraphs (3)(a) to (c) and must

 

(a) refer to IFRS as the applicable financial reporting framework if the financial statements comply with paragraph 3.2(1)(a) [Acceptable accounting principles – general requirements] of National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards, or

 

(b) refer to U.S. GAAP as the applicable financial reporting framework if the financial statements comply with section 3.7 [Acceptable accounting principles for SEC issuers] of National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards.

 

16.(7)               For the purpose of subsection (3) and paragraph (5)(b), the review report must be prepared and signed by a person or company authorized to sign a review report under the laws of a jurisdiction of Canada or a foreign jurisdiction, and that meets the professional standards of that jurisdiction.

 

16.(8)               If any of the financial statements referred to in subsection (1) are not accompanied by an auditor’s report or a review report prepared by a public accountant, the statements must include the following statement; "These financial statements were not audited or subject to a review by a public accountant, as permitted by securities legislation where an issuer has not raised more than a pre-defined amount under prospectus exemptions."

 

Annual disclosure of use of proceeds

17.(1)               The financial statements of an issuer referred to in section 16 [Annual financial statements] and the financial statements required under section 4.1 [Comparative annual financial statements and audit] of National Instrument 51-102 Continuous Disclosure Obligations must be accompanied by a notice that details, as at the date of the issuer’s most recently completed financial year, the use of the gross proceeds received by the issuer from a distribution made under the crowdfunding prospectus exemption.

 

17.(2)               An issuer is not required to provide the notice referred to in subsection (1) if

 

(a) the issuer has disclosed in one or more prior notices the use of the entire gross proceeds from the distribution, or

 

(b) the issuer is no longer required to deliver, and make available to purchasers, annual financial statements.

 

Notice of specified key events

18.                    In New Brunswick, Nova Scotia and Ontario, an issuer that is not a reporting issuer that distributes securities in reliance on the crowdfunding prospectus exemption must make reasonably available to each holder of a security acquired under the crowdfunding prospectus exemption, a notice in Form 45-108F4 Notice of Specified Key Events of each of the following events within 10 days of their occurrence:

 

(a) a discontinuation of the issuer’s business;

 

(b) a change in the issuer’s industry;

 

(c) a change of control of the issuer.

 

Period of time for providing ongoing disclosure

19.                    The obligations of an issuer that is not a reporting issuer under section 16 [Annual financial statements] and, in New Brunswick, Nova Scotia and Ontario, under section 18 [Notice of specified key events] apply until the earliest of the following events:

 

(a) the issuer becomes a reporting issuer;

 

(b) the issuer has completed a winding up or dissolution;

 

(c) the securities of the issuer are beneficially owned, directly or indirectly, by fewer than 51 security holders worldwide.

 

Books and records

20.                    An issuer that is not a reporting issuer that distributes securities under the crowdfunding prospectus exemption must maintain the following books and records relating to the distribution for 8 years following the closing of the distribution:

 

(a) the crowdfunding offering document and the materials referred to in subsection 12(1) [Additional distribution materials];

 

(b) the risk acknowledgement forms;

 

(c) except in Ontario, confirmation and validation that the purchaser is an accredited investor if the acquisition cost is greater than $2,500;

 

(d) in Ontario, the confirmation of investment limits forms;

 

(e) the ongoing disclosure documents described in Division 2 [Ongoing disclosure requirements for non-reporting issuers];

 

(f) the aggregate number of securities issued under the crowdfunding prospectus exemption, and the date of issuance and the price for each security;

 

(g) the names of all security holders of the issuer and the number and the type of securities held by each security holder;

 

(h) such other books and records as are necessary to record the business activities of the issuer and to comply with this Instrument.

 

 

PART 3 – REQUIREMENTS FOR FUNDING PORTALS

 

 

Division 1:  Registration requirements, general

 

Restricted dealer funding portal

21.                    A restricted dealer funding portal and a registered individual of the restricted dealer funding portal that distributes securities in reliance on the crowdfunding prospectus exemption must comply with all of the following:

 

(a) the requirements in this section and in Division 2 [Registration requirements, funding portals] and Division 3 [Additional requirements, restricted dealer funding portal] of this Part;

 

(b) the terms, conditions, restrictions and requirements applicable to a registered dealer and to a registered individual, respectively, including

 

(i) National Instrument 31-102 National Registration Database,

 

(ii) National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations, except for the following:

 

(A) Division 2 of Part 3 [Education and experience requirements], except for subsection 3.4(2) [Proficiency – initial and ongoing] and section 3.9 [Exempt market dealer - dealing representative];

 

(B) section 6.2 [If IIROC approval is revoked or suspended];

 

(C) section 6.3 [If MFDA approval is revoked or suspended];

 

(D) Part 8 [Exemptions from the requirement to register];

 

(E) Part 9 [Membership in a self-regulatory organization];

 

(F) paragraphs 11.5(2)(i), and (j) [General requirements for records];

 

(G) paragraphs 13.2(2)(c) and (d) and subsection 13.2(6) [Know your client];

(H) section 13.3 [Suitability];

 

(I) Division 3 of Part 13 [Referral arrangements], if the restricted dealer funding portal does not enter into a referral arrangement permitted under subsection 40(2) [Restriction on referral arrangements] of this Instrument;

 

(J) section 13.13 [Disclosure when recommending the use of borrowed money];

 

(K) section 13.16 [Dispute resolution service];

 

(L) paragraphs 14.2(2)(i), (j), (k), (m), and (n) [Relationship disclosure information];

 

(M) Division 5 of Part 14 [Reporting to clients], except for section 14.12 [Content and delivery of trade confirmation],

 

(iii) National Instrument 33-105 Underwriting Conflicts,

 

(iv) National Instrument 33-109 Registration Information, and

 

(v) the requirement to pay fees under securities legislation;

 

(c) the requirement to deal fairly, honestly and in good faith with purchasers;

 

(d) any other terms, conditions, restrictions or requirements imposed by a securities regulatory authority or regulator on the restricted dealer funding portal or on a registered individual of the restricted dealer funding portal. 

 

Note:  In Ontario, a number of requirements in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations do not apply because similar requirements are contained in provisions of the Securities Act (Ontario). To the extent that (a) one or more requirements of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations made applicable under section 21 [Restricted dealer funding portal] do not apply in Ontario, and (b) there is a similar requirement in the Securities Act (Ontario) that is referenced in a note in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations, a restricted dealer funding portal or a registered individual of the restricted dealer funding portal operating in Ontario is subject to the similar requirement referenced in the Securities Act (Ontario).

 

Registered dealer funding portal

22.                    A registered dealer funding portal and a registered individual of the registered dealer funding portal that distributes securities in reliance on the crowdfunding prospectus exemption must comply with all of the following:

 

(a) the requirements in this section and Division 2 [Registration requirements, funding portals] of this Part;

 

(b) the terms, conditions, restrictions or requirements applicable to its registration category and to a registered individual, respectively, under securities legislation.

 

Note:  In Ontario, a number of requirements in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations do not apply because similar requirements are contained in provisions of the Securities Act (Ontario). To the extent that (a) one or more requirements of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations made applicable under section 22 [Registered dealer funding portal] do not apply in Ontario, and (b) there is a similar requirement in the Securities Act (Ontario) that is referenced in a note in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations, a registered dealer funding portal or a registered individual of the registered dealer funding portal operating in Ontario is subject to the similar requirement referenced in the Securities Act (Ontario).

 

Division 2 Registration requirements, funding portals

 

Restricted dealing activities

23(1)                  A funding portal and a registered individual of the funding portal must not act as intermediaries in connection with a distribution of or trade in securities of an eligible crowdfunding issuer that is a related issuer of the funding portal.

 

23(2)                  For the purposes of subsection (1), an issuer is not a related issuer where a funding portal, an affiliate of the funding portal, or any officer, director, significant shareholder, promoter or control person of the funding portal or of any affiliate of the funding portal, has beneficial ownership of, or control or direction over, issued and outstanding voting securities of the issuer, or securities convertible into voting securities of the issuer that alone or together constitute 10 percent or less of the outstanding voting securities of the issuer.

 

Advertising and general solicitation

24.(1)              A funding portal must not, directly or indirectly, advertise a distribution or solicit purchasers under the crowdfunding prospectus exemption.

 

24.(2)               A funding portal may only make available to purchasers the crowdfunding offering document and the materials under section 12 [Additional distribution materials].

 

24.(3)               A funding portal must ensure that the information about an eligible crowdfunding issuer and a distribution of eligible securities of the issuer is presented or displayed on its online platform in a fair, balanced and reasonable manner.

 

Access to funding portal

25.(1)               Prior to allowing an eligible crowdfunding issuer to access the funding portal for the purposes of posting a distribution, a funding portal must

 

(a) enter into an issuer access agreement with the issuer,

 

(b) obtain a personal information form from each director, executive officer and promoter of the issuer, and

 

(c) conduct or arrange for the following:

 

(i) backgrounds checks on the issuer;

 

(ii) criminal record and background checks on each individual referred to in paragraph (b).

 

25.(2)                           In respect of each individual who becomes a director, executive officer or promoter of the issuer during the distribution period, the funding portal must

 

(a) obtain a personal information form, and

 

(b) conduct or arrange for criminal record and background checks to be conducted.

 

Issuer access agreement

26.                    The issuer access agreement referred to in paragraph 25(1)(a) [Access to funding portal] must include all of the following:

 

(a) confirmation that the issuer will comply with the funding portal’s policies and procedures concerning information posted by issuers on the funding portal’s online platform;

 

(b) confirmation that the information that the issuer provides to the funding portal or posts on the funding portal’s online platform will only contain permitted materials that are reasonably supported, and will not contain a promotional statement, a misrepresentation or an untrue statement of a material fact or otherwise be misleading;

 

(c) confirmation from each of the issuer and the funding portal that each is responsible for compliance with applicable securities legislation, including compliance with this Instrument;

 

(d) a requirement that the funding portal must terminate any distribution and report immediately to the securities regulatory authority or regulator if, at any time during the distribution period, it appears to the funding portal that the business of the issuer is not being, or may not be, conducted with integrity;

 

in Ontario, confirmation that the funding portal is the agent of the issuer for the purposes of a distribution under the crowdfunding prospectus exemption.

 

Obligation to review materials of eligible crowdfunding issuer

27.(1)               A funding portal is required to review the crowdfunding offering document, the materials referred to in subsection 12(1) [Additional distribution materials], the personal information forms, the results of the criminal record and background checks, and any other information about an issuer or a distribution made available to the funding portal or of which the funding portal is aware.

 

27.(2)               If it appears to the funding portal that, based upon its review of the information and materials in subsection (1), the disclosure in the crowdfunding offering document and other materials referred to in subsection 12(1) [Additional distribution materials] is incorrect, incomplete or misleading, the funding portal must require that the issuer correct, complete or clarify the incorrect, incomplete or misleading disclosure prior to its posting on the funding portal’s online platform.

 

Denial of issuer access and termination

28.(1)               The funding portal must not allow an issuer access to its online platform for the purposes of a distribution under the crowdfunding prospectus exemption if

 

(a) after reviewing the information about the issuer or the distribution made available to the funding portal or of which the funding portal is aware, the funding portal makes a good faith determination that

 

(i) the business of the issuer may not be conducted with integrity because of the past conduct of

 

(A) the issuer, or

 

(B) any of the issuer’s directors, executive officers, or promoters,

 

(ii) the issuer is not complying with one or more of its obligations under this Instrument, or

 

(iii) the crowdfunding offering document or the materials referred to in subsection 12(1) [Additional distribution materials] contain a statement or information that constitutes a misrepresentation or an untrue statement of a material fact and the issuer has not corrected the statement or information as requested by the funding portal under section 27 [Obligation to review materials of eligible crowdfunding issuer], or

 

(b) the issuer or any of its directors, executive officers or promoters has pled guilty to or has been found guilty of an offence related to or has entered into a settlement agreement in a matter that involved fraud, or securities violations.

 

28.(2)               A funding portal must terminate a distribution if, at any time during the distribution period, it appears to the funding portal that the business of the issuer is not being, or may not be, conducted with integrity.

 

Return of funds

29.                    A funding portal must promptly return to the purchaser all funds or assets received from a purchaser in connection with a distribution under the crowdfunding prospectus exemption if any of the following apply:

 

(a) the purchaser exercises its right of withdrawal;

 

(b) the requirements set out in section 6 [Conditions for closing of the distribution] are not met;

 

(c) the issuer withdraws the distribution;

 

(d) the distribution is otherwise terminated.

 

Notifications

30.                    If an amended crowdfunding offering document has been made available to purchasers under paragraph 7(3)(b) [Certificates], the funding portal must notify each purchaser that entered into an agreement to purchase securities prior to the amended crowdfunding offering document being made available that an amended crowdfunding offering document and, if applicable, other materials referred to in subsection 12(1) [Additional distribution materials] have been made available on the funding portal’s online platform.

 

Removal of distribution materials

31.                    A funding portal must remove a crowdfunding offering document and the materials referred to in subsection 12(1) [Additional distribution materials] on the earliest of the following:

 

(a) the end of the distribution period;

 

(b) the withdrawal of the distribution;

 

(c) the date on which the funding portal becomes aware that the crowdfunding offering document or the materials may contain a statement or information that is false, deceptive, misleading or that may constitute a misrepresentation or untrue statement of a material fact.

 

Monitoring purchaser communications

32.                    If a funding portal establishes an online communication channel through which purchasers may communicate with one another and with the eligible crowdfunding issuer about a distribution, the funding portal must monitor postings and remove any statement by, or information from, the issuer that is inconsistent with the crowdfunding offering document or is not in compliance with this Instrument.

 

Online platform acknowledgement

33.                    Prior to allowing a person or company entry to its online platform, a funding portal must require the person or company to acknowledge all of the following:

 

(a) that a distribution posted on the funding portal’s online platform

 

(i) has not been reviewed or approved in any way by a securities regulatory authority or regulator, and

(ii) is risky and may result in the loss of all or most of an investment;

 

(b) that the person or company may receive limited ongoing information about an issuer or an investment made through the funding portal;

 

(c) that the person or company is entering an online platform operated by a funding portal that

 

(i) is registered in the category of restricted dealer subject to the terms and conditions of this Instrument, and will not provide advice about the suitability of the purchase of the security, or

 

(ii) is registered in the category of investment dealer or exempt market dealer, and is required to provide advice about the suitability of the purchase of the security.

 

Purchaser requirements prior to purchase

34.                    Prior to a purchaser entering into an agreement to purchase securities under the crowdfunding prospectus exemption, a funding portal must

 

(a) obtain from the purchaser a risk acknowledgement form where the purchaser positively confirms having read and understood the risk warnings and the information in the crowdfunding offering document,

 

(b) except in Ontario, confirm and validate that the purchaser is an accredited investor if the acquisition cost is greater than $2,500, and

 

(c) in Ontario, obtain from the purchaser, and validate, a confirmation of investment limits form.

 

Required online platform disclosure

35.                    A funding portal must include on its online platform prominent disclosure of all compensation, including fees, costs and other expenses that the funding portal may charge to, or impose on, an eligible crowdfunding issuer or a purchaser, and any such other disclosure that may be required under securities legislation.

 

Delivery to the issuer

36.                    On or before the closing of a distribution, the funding portal must deliver to the issuer the following:

 

(a) the purchase agreement entered into between the issuer and the purchaser;

 

(b) a risk acknowledgement form from the purchaser where the purchaser positively confirms having read and understood the risk warnings and the information in the crowdfunding offering document;

 

(c) except in Ontario, confirmation and validation that the purchaser is an accredited investor, if the acquisition cost is greater than $2,500;

 

(d) in Ontario, a confirmation of investment limits form for the purchaser.

 

Release of funds

37.                    A funding portal must not release the funds raised under the distribution to the eligible crowdfunding issuer unless the requirements set out in section 6 [Conditions for closing of the distribution] have been met.

 

 

Reporting requirements

38.(1)               A funding portal must immediately notify the securities regulatory authority or regulator in writing if, at any time during the distribution period, the funding portal terminates a distribution pursuant to subsection 28(2) [Denial of issuer access and termination].

 

38.(2)               A funding portal must deliver to the securities regulatory authority or regulator, in a format acceptable to the securities regulatory authority or regulator, within 30 days of the end of the second and fourth quarters of its financial year, a report containing the following information for the immediately preceding two quarters:

 

(a) each distribution through the funding portal, including the name of the issuer, the type of security, the amount of the distribution, the industry of the issuer and the number of purchasers participating in the distribution;

 

(b) the name and industry of each issuer denied access to the funding portal and the reason for the denial;

 

(c) the name and industry of each issuer

 

(i) that was granted access to the funding portal but the distribution did not close and the reason the distribution did not close, or

 

(ii) that was granted access to the funding portal but was subsequently removed from the funding portal and the reason for removal;

 

(d) such other information as a securities regulatory authority or regulator may reasonably request.

 

Division 3 Additional requirements, restricted dealer funding portal

 

Prohibition on providing recommendations or advice

39.                    A restricted dealer funding portal and a registered individual of the restricted dealer funding portal must not, directly or indirectly, provide a recommendation or advice to a purchaser

 

(a) to purchase securities under the crowdfunding prospectus exemption or in connection with any other trade in a security, or

 

(b) to use borrowed money to finance any part of a purchase of securities under the crowdfunding prospectus exemption or in connection with any other trade in a security.

 

Restriction on referral arrangements

40.(1)               A restricted dealer funding portal must not participate in a referral arrangement.

 

40.(2)               Despite subsection (1), a funding portal may compensate a third party for referring an issuer to the funding portal.

 

Permitted dealing activities

41.                    A restricted dealer funding portal and a registered individual of the restricted dealer funding portal may only act as intermediaries in connection with

 

(a) a distribution of securities made in reliance on the crowdfunding prospectus exemption, and

(b) except in Ontario, a distribution of securities made in reliance on a start-up crowdfunding registration and prospectus exemptive relief order granted by a securities regulatory authority or regulator, provided that the restricted dealer funding portal and a registered individual of the restricted dealer funding portal are in compliance with the terms, conditions, restrictions and requirements in this Instrument.

Chief compliance officer

42.                    A restricted dealer funding portal must not designate an individual as its chief compliance officer under section 11.3 [Designating a chief compliance officer] of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations unless the individual has

 

(a) passed the Exempt Market Products Exam or the Canadian Securities Course Exam,

 

(b) passed the PDO Exam or the Chief Compliance Officers Qualifying Exam, and

 

(c) gained 12 months of experience and training that a reasonable person would consider necessary to perform the functions of a chief compliance officer for a restricted dealer funding portal.

 

Proficiency

 

43.(1)               A restricted dealer funding portal must not permit an individual to perform an activity in connection with a distribution under the crowdfunding prospectus exemption unless the individual has the education, training and experience, which may include appropriate registration, that a reasonable person would consider necessary to perform the activity competently, including understanding the structure, features and risks of the distribution.

43.(2)               For the purposes of subsection (1), the obligation to understand the structure, features and risks of the distribution does not include any obligation to assess

 
(a) the merits or expected returns of the investment to purchasers, or

(b) the commercial viability of the proposed business or distribution.

 

 

PART 4 – EXEMPTION

 

 

Exemption

44.(1)               Subject to subsection (2), the securities regulatory authority or regulator may grant an exemption from this Instrument, in whole or in part, subject to such conditions or restrictions as may be imposed in the exemption.

 

44.(2)               Despite subsection (1), in Ontario, only the regulator may grant an exemption.

 

44.(3)               Except in Ontario, an exemption referred to in subsection (1) is granted under the statute referred to in Appendix B of National Instrument 14-101 Definitions opposite the name of the local jurisdiction.

 

 

PART 5 – COMING INTO FORCE

 

 

Effective date

45.                    This Instrument comes into force on January 25, 2016.

Citation

46.                    This Instrument may be cited as MSC Rule 2015-33.

Appendix A

 

Signing Requirements for Certificate of a Crowdfunding Offering Document (Section 7)

 

1.         If the eligible crowdfunding issuer is a company, a certificate under paragraph 7(1)(b) [Certificates] of the Instrument complies with this section if it is signed

 

(a)                by the issuer's chief executive officer and chief financial officer or, if the issuer does not have a chief executive officer or chief financial officer, an individual acting in that capacity,

 

(b)                on behalf of the directors of the issuer, by

 

(i)           any 2 directors who are authorized to sign, other than the persons referred to in paragraph (a), or

 

(ii)         all the directors of the issuer, and

 

(c)                by each promoter of the issuer.

 

2.         If the eligible crowdfunding issuer is a trust, a certificate under paragraph 7(1)(b) [Certificates] of the Instrument complies with this section if it is signed by

 

(a)                the individuals who perform functions for the issuer similar to those performed by the chief executive officer and the chief financial officer of a company, and

 

(b)                each trustee and the manager of the issuer.

 

3.         A certificate under paragraph 7(1)(b) [Certificates] of the Instrument complies with this section

 

(a)                if a trustee or manager signing the certificate is an individual, the individual signs the certificate,

 

(b)                if a trustee or manager signing the certificate is a company, the certificate is signed

 

(i)                 by the chief executive officer and the chief financial officer of the trustee or the manager, and

 

(ii)               on behalf of the board of directors of the trustee or the manager, by

 

(A)       any two directors of the trustee or the manager, other than the persons referred to in subparagraph (i), or

 

(B)       all of the directors of the trustee or the manager,

 

(c)                if a trustee or manager signing the certificate is a limited partnership, the certificate is signed by each general partner of the limited partnership as described in section 5 in relation to an eligible crowdfunding issuer that is a limited partnership, or

 

(d)                in any other case, the certificate is signed by any person with authority to act on behalf of the trustee or the manager.

 

4.         Despite sections 2 and 3, if the trustees of an eligible crowdfunding issuer, do not perform functions for the issuer similar to those performed by the directors of a company, the trustees are not required to sign the certificate of the issuer if at least two individuals who perform functions for the issuer similar to those performed by the directors of a company sign the certificate.

 

5.         If the eligible crowdfunding issuer is a limited partnership, a certificate under paragraph 7(1)(b) [Certificates] of the Instrument complies with this section if it is signed by

 

(a)                each individual who performs a function for the issuer similar to any of those performed by the chief executive officer or the chief financial officer of a company, and

 

(b)                each general partner of the issuer.

 

6.         A certificate under paragraph 7(1)(b) [Certificates] of the Instrument complies with this section

 

(a)                if a general partner of the eligible crowdfunding issuer is an individual, the individual signs the certificate,

 

(b)                if a general partner of the eligible crowdfunding issuer is a company, the certificate is signed

 

(i)        by the chief executive officer and the chief financial officer of the general partner, and

 

(ii)      on behalf of the board of directors of the general partner, by

 

(A)       any two directors of the general partner, other than the persons referred to in subparagraph (i), or

 

(B)       all of the directors of the general partner,

 

(c)                if a general partner of the eligible crowdfunding issuer is a limited partnership, the certificate is signed by each general partner of the limited partnership and, for greater certainty, this section applies to each general partner required to sign,

 

(d)                if a general partner of the eligible crowdfunding issuer is a trust, the certificate is signed by the trustees of the general partner as described in section 2 in relation to an issuer that is a trust, or

 

(e)                in any other case where there is a general partner of the eligible crowdfunding issuer, the certificate is signed by any person with authority to act on behalf of the general partner.

 

7.         If an eligible crowdfunding issuer is not a company, trust or limited partnership, a certificate under paragraph 7(1)(b) [Certificates] of the Instrument complies with this section if it is signed by the persons that, in relation to the issuer, are in a similar position or perform a similar function to any of the persons referred to in section 1, 2, 3, 4, 5 or 6.

 

Annex A2   Form 45-108F1 Crowdfunding Offering Document

 

 

 

Form 45-108F1

Crowdfunding Offering Document

 

Instructions

This Form contains the disclosure items that an eligible crowdfunding issuer offering securities under the crowdfunding prospectus exemption (the issuer) must include in a crowdfunding offering document. If any disclosure item is not applicable, include the relevant heading and state “Not applicable” under it.

 

Use plain language and focus on relevant information that would assist purchasers in making an investment decision. Use tables, charts and other graphic methods of presenting information if this will make the information easier to understand. The information should be balanced and not promotional in nature. A longer document is not necessarily a better document.

 

Do not disclose forward-looking information unless there is a reasonable basis for the forward-looking information. If material forward-looking information is disclosed, it must be accompanied by disclosure that identifies the forward-looking information as such, and cautions that actual results may vary from the forward-looking information. An example of forward-looking information would be an estimate of the timeline to complete a project.

 

If this crowdfunding offering document is amended and restated, the document that is made available to purchasers must be labelled as an amended and restated crowdfunding offering document.

 

This crowdfunding offering document is divided into the following 11 items:

 

ITEM 1 – Warning to purchasers

 

ITEM 2 – Brief overview of the issuer

 

ITEM 3 – Brief overview of the issuer’s business

 

ITEM 4 – What you need to know about the issuer’s management

 

ITEM 5 – What you need to know about the distribution

 

ITEM 6 – What you need to know about the issuer

 

ITEM 7 – What you need to know about the funding portal

 

ITEM 8 – What you need to know about your rights

ITEM 9 – Other relevant information

 

ITEM 10 – Documents incorporated by reference in this crowdfunding offering document

 

ITEM 11 – Certificate

 

 

ITEM 1 – WARNING TO PURCHASERS

 

Include the following statement, in bold type:

 

“No securities regulatory authority or regulator has assessed, reviewed or approved the merits of these securities or reviewed this crowdfunding offering document. Any representation to the contrary is an offence. This is a risky investment.”

 

ITEM 2 – BRIEF OVERVIEW OF THE ISSUER

 

2.1 – Issuer information

 

Provide the following information in the table below:

 

Full legal name of issuer
Legal status (form of entity and date and jurisdiction of organization)
Articles of incorporation, limited partnership agreement or similar document, and shareholder agreement, available at:
Head office address of issuer
Telephone
Fax
Website URL
Link(s) to access video(s) relating to this offering (see instruction 1 below)
Jurisdictions of Canada where the issuer is a reporting issuer (see instruction 2 below)

 

Instructions:

1. A video may only be made available on the funding portal’s online platform.

2. Disclose each jurisdiction of Canada where the issuer is a reporting issuer. If the issuer is not a reporting issuer, disclose that fact.

 

2.2 – Issuer contact person

 

Provide the following information for a contact person at the issuer who is able to answer questions from a purchaser or a securities regulatory authority or regulator:

 

Full legal name of the contact person
Position held at the issuer
Business address
Business telephone number
Business email address

 

ITEM 3 – BRIEF OVERVIEW OF THE ISSUER’S BUSINESS

 

Briefly explain, in a few lines, the issuer’s business and why the issuer is raising funds.

 

Include the following statement, in bold type:

 

“A more detailed description of the issuer’s business is provided below.”

 

ITEM 4 – WHAT YOU NEED TO KNOW ABOUT THE ISSUER’S MANAGEMENT

 

Provide the required information in the following table for each executive officer, director, promoter and control person of the issuer.

 

Instruction: An executive officer is an individual who is: (a) a chair, vice-chair or president; (b) a chief executive officer or chief financial officer; (c) a vice-president in charge of a principal business unit, division or function including sales, finance or production; or (d) performing a policy-making function in respect of the issuer.

 

Full legal name   City, prov/state and country of residence   Position at issuer	Principal occupation for the last five years	Expertise, education, and experience that is relevant to the issuer’s business	Percentage of time the person spends/will spend on the issuer’s business (if less than full time)	Number and type of securities of the issuer owned, directly or indirectly   Date securities were acquired and price paid for securities   % of the issuer’s issued and outstanding securities as of the date of this crowdfunding offering document

State whether each person listed in item 4 or the issuer, as the case may be

 

(a)          has ever pled guilty to or been found guilty of:

                                                           (i)      a summary conviction or indictable offence under the Criminal Code (R.S.C., 1985, c. C‑46) of Canada;

                                                         (ii)      a quasi-criminal offence in any jurisdiction of Canada or a foreign jurisdiction;

                                                       (iii)      a misdemeanour or felony under the criminal legislation of the United States of America, or any state or territory therein;

                                                       (iv)      an offence under the criminal legislation of any other foreign jurisdiction,

(b)         is or has been the subject of an order (cease trade or otherwise), judgment, decree, sanction, or administrative penalty imposed by a government agency, administrative agency, self-regulatory organization, civil court, or administrative court of Canada or a foreign jurisdiction in the last ten years related to his or her involvement in any type of business, securities, insurance or banking activity,

 

(c)          is or has been the subject of a bankruptcy or insolvency proceeding in the last ten years, and/or

 

(d)         is an executive officer, director, promoter or control person of an issuer that is or has been subject to a proceeding described in paragraphs (a), (b) or (c) above.

 

ITEM 5 – WHAT YOU NEED TO KNOW ABOUT THE DISTRIBUTION

 

5.1 – Distribution information

 

Provide the following information in the table below:

 

Type of securities being distributed
Price per security	$
Description of any additional rewards or benefits that are not securities (see instruction 1 below)
Start of distribution period
End of distribution period
Date and description of amendment(s) made to this crowdfunding offering document, if any
Jurisdiction(s) where securities are being distributed
Expected proceeds of this distribution (see instruction 2 below)	$
Minimum subscription per purchaser, if applicable	$
Instructions: 1. Include the following statement, in bold type as a footnote to the table if the issuer is offering any rewards or benefits: “The disclosure of additional rewards and benefits that are not securities is for information purposes only. A purchaser is cautioned that any rights applicable to a purchaser as result of an offering of rewards or benefits that are not securities are outside the jurisdiction of securities legislation.”   2. The amount disclosed must be the same as the amount in Row A in the table under Proceeds to be raised in item 5.2.

 

5.2 – Aggregate proceeds

Insert the relevant dollar amount and include the following statement, in bold type:

 

The issuer requires aggregate minimum proceeds of $_________ to accomplish the business objectives described below.

 

Provide the following information in the tables below:

 

Proceeds to be raised

 

A.	Expected proceeds of this distribution	$
B.	Proceeds expected to be received from concurrent distributions, if any, that will be unconditionally available to the issuer at the time of closing of the distribution (see instruction 1 below)	$
C.	Aggregate minimum proceeds C = (A+B) (see instruction 2 below)	$
D.	Maximum amount the issuer wants to raise	$

 

Instructions:

1. The amount disclosed in Row B should reconcile to the information provided in item 5.3.

2. The amount disclosed in Row C must be the same as the amount disclosed in the statement at the beginning of this item.

 

Use of proceeds

 

	Description of expenses	Assuming aggregate minimum proceeds	Assuming maximum amount raised, if applicable
A.	Fees to be paid to funding portal (see instructions 1 and 2 below)	$	$
B.	Other expenses of this distribution (see instruction 3 below)	$	$
C.	Funds to accomplish business objectives (see instruction 4)	$	$
D.	Total (see instruction 5)	$	$

 

Instructions:

1. Describe the fees (e.g., commission, arranging fee or other fee) that the funding portal is charging for its services. Describe each type of fee and the estimated amount to be paid for each type. If a commission is being paid, indicate the percentage that the commission will represent of the gross proceeds of the distribution. 

2. Disclose the estimated number and value of the issuer’s securities to be issued, if any, in consideration for all or a portion of the portal’s fees.

3. State the nature of each expense (e.g. legal, accounting, audit) and the estimated amount of the expense.

4. State the business objectives the issuer expects to accomplish using the proceeds to be raised, assuming: (i) the aggregate minimum proceeds are raised; and (ii) if applicable, the maximum amount is raised. Describe each business objective and state the estimated time period for the objective to be accomplished and the costs related to accomplishing it. Each business objective must be included in a separate row in the table.

5. The total dollar amount of the proceeds to be raised must be accounted for in the table. The amount disclosed in Row D under the column Assuming aggregate minimum proceeds must be the same as the amount in Row C in the table under Proceeds to be raised in this item. The amount disclosed in Row D under the column Assuming maximum amount raised, if applicable must be the same as the amount in Row D in the table under Proceeds to be raised in this item.

 

Business Acquisition

 

If any of the proceeds will be used by the issuer to acquire, invest in, or merge with a business, disclose, for that business, the information required by items 3 and 6.3, together with other relevant information.

 

5.3 – Concurrent distributions

 

If the proceeds of a concurrent distribution will be unconditionally available to the issuer at the time of closing of the distribution, provide the following information for each distribution by any member of the issuer group that is intended to be conducted, at least in part, during the distribution period:

 

(a)    type of securities being distributed in concurrent distribution;

 

(b)   proposed size of concurrent distribution;

 

(c)    proposed closing date of concurrent distribution;

 

(d)   price and terms of securities to be distributed in concurrent distribution.

 

Instruction: If during the course of this distribution: (i) there is any change in the size, type of security, price per security, or other terms and conditions in a concurrent distribution being made by the issuer; (ii) there is any change in the amount of proceeds proposed to be received by the issuer from a concurrent distribution being made by a member of the issuer group, other than the issuer; or (iii) a new distribution is commenced by any member of the issuer group where the proceeds of the distribution will be unconditionally available to the issuer, this crowdfunding offering document must be amended to reflect this development.

 

5.4 – Description of securities distributed and relevant rights

 

This security gives you the following rights (choose all that apply):

ÿ        Voting rights;

ÿ        Interest or dividends;

ÿ        Redemption rights;

ÿ        Rights on dissolution;

ÿ        Conversion rights: Each security is convertible into  ____________________________;

ÿ        Other (describe) ____________________________.

 

Provide a description of any right to receive interest or dividends.

 

Other rights or obligations

 

State whether purchasers will have protections such as tag-along or pre-emptive rights. If no such rights will be provided or are minimal in nature, explain:

 

(a)                the risks associated with being a minority security holder;

 

(b)               that the absence of such rights affects the value of the securities.

 

Any other restrictions or conditions

 

Provide a brief summary of any other restrictions or conditions that attach to the securities being distributed.

 

Dilution

 

Include the following statement:

 

“Your percentage of ownership in this issuer may be reduced significantly due to a number of factors beyond your control, such as the rights and characteristics of other securities already issued by the issuer, future issuances of securities by the issuer, and potential changes to the capital structure and/or control of the issuer.”    

    

5.5 – Other crowdfunding distributions

 

For any crowdfunding distribution in which the issuer or an executive officer, director, promoter or control person of the issuer has been involved in the past five years, provide the information below:

 

For crowdfunding distributions that were started but the issuer did not receive any funds:

 

(a)     the full legal name of the issuer that made the distribution;

 

(b)     the date the distribution was discontinued.

 

For closed crowdfunding distributions:

(a)    the full legal name of the issuer that made the distribution;

 

(b)   the date that the distribution commenced and the date it closed;

 

(c)    the name and website address of the funding portal through which the distribution was made;

 

(d)   the amount raised;

 

(e)    the intended use of proceeds stated in the relevant crowdfunding offering document and the actual use of proceeds.

This information must be provided for each person that has been involved in a crowdfunding distribution in the past five years, whether with the issuer, or with another issuer.

 

ITEM 6 – WHAT YOU NEED TO KNOW ABOUT THE ISSUER

 

6.1 – Issuer’s business

 

Indicate which statement(s) best describe the issuer’s operations (select all that apply):

□ has never conducted operations;

□ is in the development stage;

□ is currently conducting operations;

□ has shown profit in the last financial year.

Briefly describe:

 

(a)    the nature of the issuer’s product(s) or service(s);

 

(b)   the industry in which the issuer operates;

(c)    the issuer’s long term business objectives;

 

(d)   the issuer’s assets and whether those assets are owned or leased.

 

6.2 – Related party relationships and transactions

 

For purposes of this item, a control person is a person or company that controls, directly or indirectly, more than 20% of the issuer’s voting securities prior to the closing of this distribution.

 

Family relationships
Are there any family relationships between any executive officers, directors, promoters or control persons?   If yes, describe the nature of each relationship.	Y        N ÿ        ÿ
Proceeds to be raised   Will the issuer use any of the proceeds to be raised to:
•       acquire assets or services from an executive officer, director, promoter or control person, or an associate of any of them?	Y        N ÿ        ÿ
•       loan money to any executive officer, director, promoter or control person, or an associate of any of them?	Y        N ÿ        ÿ
•       reimburse any executive officer, director, promoter or control person, or an associate of any of them, for assets previously acquired, services previously rendered, monies previously loaned or advanced, or for any other reason?	Y        N ÿ        ÿ
If the answer to any of the above is “yes”, disclose the relationship between each person and the issuer and the principal terms of each transaction. If assets were acquired from a person, disclose the cost of the asset to the issuer and the method used to determine this cost. Disclose for each person who has been involved in more than one related party transaction, their relationship with the issuer and which of the transactions they have been involved with.

 

 

 

6.3 – Principal risks facing the business

 

Disclose the risks facing the issuer’s business that could result in a purchaser losing the value of the purchaser’s investment. Only those risks that are highly significant to the business should be disclosed. The risks should be disclosed in order of most to least significant.

 

In addition to disclosing the principal risks in this crowdfunding offering document, reporting issuers may incorporate by reference the risk disclosure in their continuous disclosure documents (for example, their annual information form or management discussion & analysis).

 

Instruction: Explain the risks of investing in the issuer for the purchaser in a meaningful way, avoiding overly general or “boilerplate” disclosure. Disclose both the risk and the factual basis for it. Risks can relate to the issuer’s business, its industry, its clients, etc.

 

Litigation

 

Disclose any litigation or administrative action that has had or is likely to have a material effect on the issuer’s business. Include information not only about present pending litigation or administrative actions, but also past concluded litigation or administrative actions, and potential future claims of which the issuer is aware.  Disclose the name of the court, agency or tribunal where the proceeding is pending, a description of the facts underlying the claim and the relief sought, or any information known to the issuer about pending litigation or administrative actions.

6.4 – Financial information

 

If the issuer is a non-reporting issuer, include the following statement, in bold type:

 

“The issuer’s financial statements have not been provided to or reviewed by a securities regulatory authority or regulator.”

 

Fiscal year end

 

Month and Day: _______________________

 

See Schedule A Crowdfunding Offering Document – Financial Statement Requirements to determine which financial statements must be attached to this crowdfunding offering document.

6.5 – Ongoing disclosure

 

Briefly describe how the issuer intends to communicate with purchasers.

 

Reporting issuer

 

If the issuer is a reporting issuer, state that the issuer is subject to reporting obligations under securities legislation and explain how a purchaser can access the issuer’s continuous disclosure documents.

 

Non-reporting issuer

 

If the issuer is a non-reporting issuer:

 

(a)    state that the issuer has limited disclosure obligations under securities legislation and that the issuer is required to provide only annual financial statements and annual disclosure regarding use of proceeds;

(b)   state the nature and frequency of any other disclosure the issuer intends to provide to purchasers;

(c)    explain how purchasers can access the disclosure documents referred to in paragraphs (a) and (b).

 

In New Brunswick, Nova Scotia and Ontario, a non-reporting issuer must make available to each holder of a security acquired under the crowdfunding prospectus exemption, within 10 days of their occurrence, a notice of each of the following events:

(a)    a discontinuation of the issuer’s business;

(b)   a change in the issuer’s industry;

(c)    a change of control of the issuer.

6.6 – Capital structure

 

Disclose the following information:

(a)    the issuer’s capital structure, including the terms and conditions of any other securities that are issued and outstanding as at the date of this crowdfunding offering document and the amount(s) that were paid for the securities;

 

(b)   using the calculation outlined below, the percentage of the issuer’s outstanding securities that the securities being distributed will represent on the closing of the distribution:

 

     A                   = %

  A + B

 

A - Number of securities being distributed under this distribution

B - Number of issued and outstanding securities as of the date of this crowdfunding offering document

Instruction: If the issuer has more than one class of outstanding securities, the calculation should be based only on the class of securities that is being distributed. If the securities being distributed are non-convertible debt securities, the calculation should be based on the face value of the debt securities;

(c)    the total number of securities reserved or subject to issuance under outstanding options, warrants or rights, the amount(s) that were paid for the securities, and the terms and conditions of those instruments.

 

6.7 – Connected issuers

 

If the issuer is a connected issuer to a funding portal, include the disclosure required by Appendix C to National Instrument 33-105 Underwriting Conflicts (NI 33-105).

 

Instruction: The definition of “connected issuer” is provided in NI 33-105.

6.8 – Management compensation

 

Reporting issuer

 

If the issuer is a reporting issuer, incorporate by reference the disclosure provided for purposes of item 3 of Form 51-102F6 Statement of Executive Compensation (Form 51-102F6) and other information disclosed in the issuer’s Form 51-102F6 as needed.  

 

Non-reporting issuer

 

If the issuer is a non-reporting issuer, provide the following information in the format set out below for each director and the three most highly compensated executive officers (or all executive officers if there are fewer than three):

 

Name of person and position at issuer	Total compensation paid to that person during the 12 month period preceding commencement of this distribution		Total compensation expected to be paid to that person during the 12 month period following closing of this distribution
	Cash ($)	Other Compensation	Cash ($)	Other Compensation

 

Instruction: Describe any non-cash compensation and how it was valued.

 

6.9 – Mining issuer disclosure

 

If the issuer is a mining issuer, state that the issuer is subject to the requirements of National Instrument 43-101 Standards of Disclosure for Mineral Projects (NI 43-101).

 

Instruction: Note that NI 43-101 applies to all issuers, including non-reporting issuers.

 

ITEM 7 – WHAT YOU NEED TO KNOW ABOUT THE FUNDING PORTAL

 

State that the issuer is using the services of a funding portal to offer its securities and provide the contact information of the funding portal below:

 

Full legal name of the funding portal
Full website address of the funding portal
Business email address of the funding portal
Full legal name of the Chief Compliance Officer
Full legal name of the contact person
	Business address
	Business telephone number

 

Include the following statement:

 

“A purchaser can check if the funding portal is operated by a registered dealer at the following website: www.aretheyregistered.ca”

 

ITEM 8 – WHAT YOU NEED TO KNOW ABOUT YOUR RIGHTS

 

Reporting issuer

 

If the issuer is a reporting issuer, state that a purchaser has the following contractual rights in connection with the purchase of securities:

 

(a)    if the securities legislation of the jurisdiction in which the purchaser resides does not provide a comparable right, a right of action for damages or rescission if this crowdfunding offering document, or any document or video made available to a purchaser in addition to this crowdfunding offering document, contains a misrepresentation, and

 

(b)   if the securities legislation of the jurisdiction in which the purchaser resides does not provide a comparable right, a right to withdraw from an agreement to purchase securities distributed under this crowdfunding offering document by delivering a notice to the funding portal within 48 hours after the date of subscription.

 

Non-reporting issuer

 

If the issuer is a non-reporting issuer, state that a purchaser has the following contractual rights in connection with the purchase of securities:

 

(a)    a right of action for damages or rescission if this crowdfunding offering document, or any document or video made available to a purchaser in addition to this crowdfunding offering document, contains an untrue statement of a material fact, and

(b)   if the securities legislation of the jurisdiction in which the purchaser resides does not provide a comparable right, a right to withdraw from an agreement to purchase securities distributed under this crowdfunding offering document by delivering a notice to the funding portal within 48 hours after the date of subscription.

 

Disclose how a purchaser can find more information about these rights and how to exercise them. The disclosure should include who a purchaser needs to contact, how a purchaser can contact that person and the deadline for a purchaser to do so in order to exercise their rights. The issuer may choose to include a link to the relevant portion of the funding portal’s website.

 

ITEM 9 – OTHER RELEVANT INFORMATION

 

State any other facts that would likely be important to a purchaser purchasing securities under this crowdfunding offering document.

 

ITEM 10 – DOCUMENTS INCORPORATED BY REFERENCE IN THIS CROWDFUNDING OFFERING DOCUMENT

 

If the issuer is a reporting issuer, include the following disclosure and provide the required information in the table below:

 

Information has been incorporated by reference into this crowdfunding offering document from documents listed in the table below, which have been filed with the securities regulatory authorities or regulators in Canada. The documents incorporated by reference are available for viewing on the SEDAR website at www.sedar.com.

 

Documents listed in the table and information provided in those documents are not incorporated by reference to the extent that their contents are modified or superseded by a statement in this crowdfunding offering document or in any other subsequently filed document that is also incorporated by reference in this crowdfunding offering document.

 

Description of document (in the case of material change reports, provide a brief description of the nature of the material change)	Date of document

 

ITEM 11 - CERTIFICATE

 

11.1 - Insert the date of this crowdfunding offering document and the date it was made available to purchasers through the funding portal and include the following statement, in bold type:

 

For reporting issuers:

 

“This crowdfunding offering document does not contain a misrepresentation. Purchasers of securities have a right of action in the case of a misrepresentation.”

 

For non-reporting issuers:

 

“This crowdfunding offering document does not contain an untrue statement of a material fact. Purchasers of securities have a right of action in the case of an untrue statement of a material fact.”

11.2 - For both reporting and non-reporting issuers, provide the signature, date of the signature, name and position of each individual certifying this crowdfunding offering document.

11.3 - If this crowdfunding offering document is signed electronically, include the following statement for each individual certifying the document, in bold type:

“I acknowledge that I am signing this crowdfunding offering document electronically and agree that this is the legal equivalent of my handwritten signature. I will not at any time in the future claim that my electronic signature is not legally binding.”

Instruction: See Appendix A of Multilateral Instrument 45-108 Crowdfunding to determine who is required to certify this crowdfunding offering document.

Securities regulatory authorities and regulators of the participating jurisdictions:
Manitoba	The Manitoba Securities Commission 500 – 400 St Mary Avenue Winnipeg, Manitoba R3C 4K5 Telephone: 204-945-2548 Toll free in Manitoba: 1-800-655-2548 Fax: 204‑945-0330 E-mail: exemptions.msc@gov.mb.ca www.msc.gov.mb.ca
New Brunswick	Financial and Consumer Services Commission 85 Charlotte Street, Suite 300 Saint John, New Brunswick E2L 2J2 Toll free: 1-866-933-2222 Fax: 506-658-3059 E-mail: info@fcnb.ca www.fcnb.ca
Nova Scotia	Nova Scotia Securities Commission Suite 400, 5251 Duke Street Halifax, Nova Scotia B3J 1P3 Telephone: 902-424-7768 Toll free in Nova Scotia: 1-855-424-2499 Fax: 902-424-4625 E‑mail: nssc.crowdfunding@novascotia.ca www.nssc.gov.ns.ca
Ontario	Ontario Securities Commission 20 Queen Street West, 22nd Floor Toronto, Ontario M5H 3S8 Telephone: 416-593-8314 Toll-free (North America): 1-877-785-1555 Fax: 416-593-8122 E-mail: inquiries@osc.gov.on.ca www.osc.gov.on.ca
Québec	Autorité des marchés financiers Direction du financement des sociétés 800, rue du Square-Victoria, 22nd floor P.O. Box 246, tour de la Bourse Montréal, Québec H4Z 1G3 Telephone: 514-395-0337 Toll free in Québec: 1-877-525-0337 Fax: 514‑873-3090 E‑mail: financement-participatif@lautorite.qc.ca www.lautorite.qc.ca

 

 

Schedule A

 

Crowdfunding Offering Document

Financial Statement Requirements

 

 

1.      In this schedule

 

“Canadian Financial Statement Review Standards” means standards for the review of financial statements by a public accountant determined with reference to the Handbook;

 

“SEC issuer” means an SEC issuer as defined in National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards;

 

“U.S. AICPA Financial Statement Review Standards” means the standards of the American Institute of Certified Public Accountants for a review of financial statements by a public accountant, as amended from time to time.

 

Reporting issuer

2.      If the issuer is a reporting issuer, attach as an appendix to this crowdfunding offering document

 

(a)              the most recent annual financial statements the issuer has filed with the securities regulatory authority or regulator, and

(b)              the most recent interim financial report the issuer has filed with the securities regulatory authority or regulator for an interim period that is subsequent to the financial year covered by the annual financial statements referred to in paragraph (a).

 

Non-reporting issuer

3.      If the issuer is not a reporting issuer

(a)              Attach as an appendix to this crowdfunding offering document the financial statements listed in paragraphs 4.1(1)(a), (b), (c) and (e) [Comparative annual financial statements and audit] of National Instrument 51-102 Continuous Disclosure Obligations.

 

(b)              Despite paragraph (a), if the issuer has not completed a financial year, attach as an appendix to this crowdfunding offering document financial statements that include

 

(i)                 a statement of comprehensive income, a statement of changes in equity, and a statement of cash flows for the period from the date of the formation of the issuer to a date not more than 90 days before the date of this crowdfunding offering document,

(ii)               a statement of financial position as at the end of the period referred to in subparagraph (i), and

(iii) notes to the financial statements.

 

(c)  The financial statements referred to in paragraphs (a) and (b), and any other financial statements that are attached as an appendix to this crowdfunding offering document, must

 

(i)      be approved by management and be accompanied by

 

A.     a review report or auditor’s report if the amount raised by the issuer under one or more prospectus exemptions from the date of the formation of the issuer until 90 days before the date of this crowdfunding offering document, is $250,000 or more but is less than $750,000, or

 

B.     an auditor’s report if the amount raised by the issuer under one or more prospectus exemptions from the date of the formation of the issuer until 90 days before the date of this crowdfunding offering document, is $750,000 or more,

 

(ii)   comply with paragraph 3.2(1)(a) [Acceptable accounting principles - general requirements], subparagraph 3.2(1)(b)(i) [Acceptable accounting principles - general requirements], and subsection 3.2(5) [Acceptable accounting principles - general requirements] of National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards, and 

(iii) comply with section 3.5 [Presentation and functional currencies] of National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards.

 

(d)  If the financial statements referred to paragraphs (a) and (b), or any other financial statements that are attached as an appendix to this crowdfunding offering document, are accompanied by a review report, the financial statements must be reviewed in accordance with Canadian Financial Statement Review Standards and the review report must

(i)     not include a reservation or modification,

(ii)   identify the financial periods that were subject to review, 

(iii) be in the form specified by Canadian Financial Statement Review Standards, and

 

(iv) refer to IFRS as the applicable financial reporting framework.

 

(e)  If the financial statements referred to in paragraphs (a) and (b), or any other financial statements that are attached as an appendix to this crowdfunding offering document, are accompanied by an auditor’s report, the auditor’s report must be

 

(i)      prepared in accordance with section 3.3 [Acceptable auditing standards – general requirements] of National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards, and

 

(ii)   signed by an auditor that complies with section 3.4 [Acceptable auditors] of National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards.

 

(f)   If the financial statements referred to in paragraphs (a) and (b), or any other financial statements that are attached as an appendix to this crowdfunding offering document, are those of an SEC issuer,

 

(i)     the statements may be prepared in accordance with section 3.7 [Acceptable accounting principles for SEC issuers] of National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards,

 

(ii)   the financial statements may be reviewed in accordance with U.S. AICPA Financial Statement Review Standards and accompanied by a review report prepared in accordance with U.S. AICPA Financial Statement Review Standards that

 

A.     does not include a modification or exception,

B.     identifies the financial periods that were subject to review,

C.     identifies the review standards used to conduct the review and the accounting principles used to prepare the financial statements, and

 

D.     refers to IFRS as the applicable financial reporting framework if the financial statements comply with paragraph 3.2(1)(a) [Acceptable accounting principles - general requirements] of National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards, and

 

(iii) the financial statements may be audited in accordance with section 3.8 [Acceptable auditing standards for SEC issuers] of National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards.

 

(g)  If the financial statements referred to in paragraph (f) are accompanied by a review report and the statements have been reviewed in accordance with Canadian Financial Statement Review Standards, the review report must be in compliance with subparagraphs 3(d)(i) to (iii) and must

 

(i)     refer to IFRS as the applicable financial reporting framework if the financial statements comply with paragraph 3.2(1)(a) [Acceptable accounting principles – general requirements] of National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards, or

 

(ii)   refer to U.S. GAAP as the applicable financial reporting framework if the financial statements comply with  section 3.7 [Acceptable accounting principles for SEC issuers] of National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards.

 

(h)  For the purpose of paragraph (d) and subparagraph (f)(ii), the review report must be prepared and signed by a person or company authorized to sign a review report under the laws of a jurisdiction of Canada or a foreign jurisdiction, and that meets the professional standards of that jurisdiction.

 

(i)    If any of the financial statements referred to in paragraphs (a) and (b), or any other financial statements that are attached as an appendix to this crowdfunding offering document, are not accompanied by an auditor’s report or a review report prepared by a public accountant, the statements must include the following statement: “These financial statements were not audited or subject to a review by a public accountant as permitted by securities legislation where an issuer has not raised more than a pre-defined amount under prospectus exemptions.”

 

 

 

 

 

 

 

Instructions related to financial statement requirements and the disclosure of other financial information

 

What constitutes an issuer’s first financial year - The first financial year of an issuer commences on the date of its incorporation or organization and ends at the close of that financial year. 

 

What would be presented in an issuer’s financial statements if the issuer has not completed a financial year - The financial statements would include the financial statements listed in paragraphs 4.1(1)(a), (b), (c) and (e) [Comparative annual financial statements and audit] of National Instrument 51-102 Continuous Disclosure Obligations for the period from the date of the formation of the issuer to a date not more than 90 days before the date of this crowdfunding offering document. The financial statements would not include a comparative period.

What financial years need to be audited or reviewed - If an issuer is required to have an auditor’s report or review report accompany its financial statements in accordance with subparagraph 3(c)(i) of this schedule, the financial statements for the most recent period and the comparative period, if any, are both required to be audited or are both required to be reviewed.

 

Statement required in annual financial statements that have not been audited or reviewed – Paragraph 3(i) of this schedule requires that if an issuer’s annual financial statements are not accompanied by an auditor’s report or a review report prepared by a public accountant, the financial statements must include a statement that discloses that fact. Consistent with the requirements set out in subparagraph 3(c)(i) of this schedule, an issuer’s annual financial statements are not required to be audited or reviewed by a public accountant if the issuer has raised less than $250,000 under one or more prospectus exemptions from the date of the formation of the issuer until  90 days before the date of this crowdfunding offering document.

 

What financial reporting framework is identified in the financial statements, and any accompanying auditor’s report or review report - If an issuer’s financial statements are prepared in accordance with Canadian GAAP for publicly accountable enterprises and include an unreserved statement of compliance with IFRS, the auditor’s report or review report must refer to IFRS as the applicable financial reporting framework.

 

There are two options for referring to the financial reporting framework in the applicable financial statements and accompanying auditor’s report or review report:

 

(a)   refer only to IFRS in the notes to the financial statements and in the auditor’s report or review report, or

(b)   refer to both IFRS and Canadian GAAP in the notes to the financial statements and in the auditor’s report or review report.

Non-GAAP financial measures - An issuer that intends to disclose non-GAAP financial measures in its crowdfunding offering document should refer to CSA guidance for a discussion of staff expectations concerning the use of these measures.

Annex A3   Form 45-108F2 Risk Acknowledgement

 

Form 45-108F2

Risk Acknowledgement

 

Instructions: This form must be completed by the purchaser before the purchaser enters into an agreement to purchase securities under the exemption in Multilateral Instrument 45-108 Crowdfunding.

 

Issuer name:    i.e., ABC Company

Type of security offered: i.e., common share

 

WARNING! BUYER BEWARE: This investment is risky. Don’t invest unless you can afford to lose all the money you pay for this investment.

 

 

	Yes	No
1. Risk acknowledgement
Risk of loss – Do you understand that this is a risky investment and that you may lose all the money you pay for this investment?
Liquidity risk – Do you understand that you may never be able to sell this investment?
Lack of information – Do you understand that you may receive little ongoing information about the issuer and/or this investment?
No income – Do you understand that you may not earn any income, such as dividends or interest, on this investment?
2. No approval and no advice
No approval – Do you understand that this investment has not been reviewed or approved in any way by a securities regulatory authority?
No advice – Do you understand that you will not receive advice about whether this investment is suitable for you to purchase?  [Instructions: Delete if the funding portal is operated by a registered investment dealer or exempt market dealer.]

 

3. Limited legal rights
Limited legal rights – Do you understand that you will not have the same rights as if you purchased under a prospectus or through a stock exchange? If you want to know more, you may need to seek professional legal advice.
4. Purchaser’s understanding of this investment
Investment risks – Have you read this form and do you understand the risks of making this investment?
Offering document – Before you invest, you should read the offering document carefully. The offering document contains important information about this investment. If you have not read the offering document or if you do not understand the information in it, you should not invest. Have you read and do you understand the information in the offering document?
5. Purchaser’s acknowledgement
First and last name:	Date:
Electronic signature: By clicking the ‘I confirm’ button, I acknowledge that I am signing this form electronically and agree that this is the legal equivalent of my handwritten signature. I will not at any time in the future claim that my electronic signature is not legally binding.  The date of my electronic signature is the same as my acknowledgement.
6. Additional information
•        You have 48 hours to cancel your purchase from the date of the agreement to purchase the security and any amendment to the crowdfunding offering document of the issuer, by sending a notice to the funding portal at: [Instructions: Provide an email address or a fax number where purchasers can send their notice. Describe any other way purchasers can cancel their purchase.] •        To check if the funding portal is operated by a registered dealer, go to www.aretheyregistered.ca  •        If you want more information about your local securities regulatory authority, go to www.securities-administrators.ca

 

Annex A4   Form 45-108F3 Confirmation of Investment Limits

 

 

 

Form 45-108F3

Confirmation of Investment Limits

 

Instructions: This form must be completed by the purchaser before the purchaser enters into an agreement to purchase securities under the exemption in Multilateral Instrument 45-108 Crowdfunding (the crowdfunding exemption) in Ontario.

 

How you qualify to buy securities under the crowdfunding exemption: Checkmark the statement under A, B or C that applies to you.  You may checkmark more than one statement. If you qualify under B or C, complete the confirmation of investment limits in the relevant section.

 

A. Permitted Client

You are a permitted client because: □  You are an individual who beneficially owns financial assets, as defined in section 1.1 of National Instrument 45-106 Prospectus Exemptions, having an aggregate realizable value that, before taxes but net of any related liabilities, exceeds $5 million. □  Other - you are a person or company that otherwise falls within the definition of a permitted client in section 1.1 of Part 1 in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Please specify the relevant category: ____.

B. Accredited Investor

You are an accredited investor because (check all that apply): □  Your net income before taxes was more than $200,000 in each of the 2 most recent calendar years and you expect it to be more than $200,000 in this calendar year. (You can find your net income before taxes on your personal income tax return.) □  Your net income before taxes combined with your spouse’s was more than $300,000 in each of the 2 most recent calendar years and you expect your combined net income before taxes to be more than $300,000 in the current calendar year. □  Either alone or with your spouse, you own more than $1 million in cash and securities, after subtracting any debt related to the cash and securities. □  Either alone or with your spouse, you have net assets worth more than $5 million. (Your net assets are your total assets (including real estate) minus your total debt.) □  Other - you are a person or company that otherwise falls within the definition of an accredited investor as defined in section 1.1 of National Instrument 45-106 Prospectus Exemptions and in subsection 73.3(1) of the Securities Act, R.S.O. 1990 c. S.5. Please specify the relevant category: ____. Confirmation (if you are an accredited investor but not a permitted client) □  I confirm that, after taking into account my investment of $__________ today in this issuer: --  I have not invested more than $25,000 in a single crowdfunding investment, and --  I have not invested more than $50,000 in all of the crowdfunding investments I have made in this calendar year.

 

C. Retail Investor

You are a retail investor if none of the statements in the previous two sections apply to you. Confirmation (if you are a retail investor) □  I confirm that, after taking into account my investment of $__________ today in this issuer: --  I have not invested more than $2,500 in a single crowdfunding investment, and --  I have not invested more than $10,000 in all of the crowdfunding investments I have made in this calendar year.

 

Purchaser acknowledgement

First and last name:	Date:
Electronic signature: By clicking the ‘I confirm’ button, I acknowledge that I am signing this form electronically and agree that this is the legal equivalent of my handwritten signature. I will not at any time in the future claim that my electronic signature is not legally binding.  The date of my electronic signature is the same as my acknowledgement.

Funding portal information
This section must only be completed if an investor has received advice about this investment from a funding portal registered in the category of an investment dealer or an exempt market dealer.
First and last name of registered individual:
Telephone:	Email:
Name of firm:	Registration Category:

 

Annex A5   Form 45-108F4 Notice of Specified Key Events

 

Form 45-108F4

Notice of Specified Key Events

 

Instructions: This is the form of notice required under section 18 of Multilateral Instrument 45-108 Crowdfunding in New Brunswick, Nova Scotia and Ontario to be made available to holders of securities acquired under the crowdfunding prospectus exemption.

 

Annex A6   Form 45-108F5 Personal Information Form and Authorization to Collect, Use and Disclose Personal Information

 

Form 45-108F5

Personal Information Form and

Authorization to Collect, Use and Disclose Personal Information

 

Instructions: This Personal Information Form and Authorization to Collect, Use and Disclose Personal Information (the “Form”) is to be completed by every director, executive officer, and promoter of an eligible crowdfunding issuer relying on the crowdfunding prospectus exemption as set out in Multilateral Instrument 45-108 Crowdfunding.

 

All Questions              All questions must have a response.  The response of “N/A” or “Not Applicable” will not be accepted for any questions, except Questions 1(B), 2(iii) and (v) and 5.

 

Questions 6 to 10        Please place a checkmark (√) in the appropriate space provided.  If your answer to any of questions 6 to 10 is “YES”, you must, in an attachment, provide complete details, including the circumstances, relevant dates, names of the parties involved and final disposition, if known.  Any attachment must be initialled by the person completing this Form.  Responses must consider all time periods.

If you have received a pardon under the Criminal Records Act (Canada) for an Offence that relates to fraud (including any type of fraudulent activity), misappropriation of money or other property, theft, forgery, falsification of books or documents or similar Offences, you must disclose the pardoned Offence in this Form.  In such circumstances:

(a)        the appropriate written response would be “Yes, pardon granted on (date)”; and

(b)        you must provide complete details in an attachment to this Form.

DEFINITIONS

 

“Offence” An offence includes:

 

(a)        a summary conviction or indictable offence under the Criminal Code (Canada);

 

(b)        a quasi-criminal offence (for example under the Income Tax Act (Canada), the Immigration and Refugee Protection Act (Canada) or the tax, immigration, drugs, firearms, money laundering or securities legislation of any Canadian or foreign jurisdiction);

 

(c)        a misdemeanour or felony under the criminal legislation of the United States of America, or any state or territory therein; or

 

(d)        an offence under the criminal legislation of any other foreign jurisdiction;

 

“Proceedings” means:

(a)        a civil or criminal proceeding or inquiry which is currently before a court;

(b)        a proceeding before an arbitrator or umpire or a person or group of persons authorized by law to make an inquiry and take evidence under oath in the matter;

 

(c)        a proceeding before a tribunal in the exercise of a statutory power of decision making where the tribunal is required by law to hold or afford the parties to the proceeding an opportunity for a hearing before making a decision; or

 

(d)        a proceeding before a self-regulatory entity authorized by law to regulate the operations and the standards of practice and business conduct of its members (including where applicable, issuers listed on a stock exchange) and individuals associated with those members and issuers, in which the self-regulatory entity is required under its by-laws, rules or policies to hold or afford the parties the opportunity to be heard before making a decision, but does not apply to a proceeding in which one or more persons are required to make an investigation and to make a report, with or without recommendations, if the report is for the information or advice of the person to whom it is made and does not in any way bind or limit that person in any decision the person may have the power to make;

 

“securities regulatory authority” or “SRA” means a body created by statute in any Canadian or foreign jurisdiction to administer securities law, regulation and policy (e.g. securities commission), but does not include an exchange or other self-regulatory entity;

 

“self-regulatory entity” or “SRE” means:

 

(a)        a stock, derivatives, commodities, futures or options exchange;

 

(b)        an association of investment, securities, mutual fund, commodities, or future dealers;

 

(c)        an association of investment counsel or portfolio managers;

 

(d)        an association of other professionals (e.g. legal, accounting, engineering); and

 

(e)        any other group, institution or self-regulatory organization, recognized by a securities regulatory authority, that is responsible for the enforcement of rules, policies, disciplines or codes under any applicable legislation, or considered an SRE in another country.

1.	Identification of individual completing form
A.	Last name(s):		First name(s):				Full middle name(s) (No initials.  If none, please state):
	Name(s) most commonly known by:
	Name of issuer:
	Present or proposed position(s) with the issuer (check (√) all positions below that are applicable)	(√)		If director / executive officer disclose the date elected / appointed				If executive officer – provide title If other – provide details
				MM	DD	YY
	Director
	Executive Officer
	Promoter

 

B.	Other than the name given in Question 1A above, provide any legal names, assumed names or nicknames under which you have carried on business or have otherwise been known, including information regarding any name change(s) resulting from marriage, divorce, court order or any other process.  Use an attachment if necessary.	From		To
		MM	YY	MM	YY

 

C.	Gender		Date of birth			Place of birth
	Male		MM	DD	YYYY	City	Province/State	Country
	Female

 

D.	Marital Status:	Full name of spouse (include common law):	Occupation of spouse:

 

E.	Telephone and Facsimile Numbers and Email Address
	Residential/ Cellular: (             )	Facsimile: (             )
	Business: (             )	E-mail*:

 

^*Provide an email address that the funding portal may use to contact you regarding this form.  Where the securities regulatory authority or regulator (as defined in section1.1 of National Instrument 14-101 Definitions) has requested the funding portal to provide it with this form, the securities regulator authority or regulator may also use the email address to contact you.   This email address may be used to exchange personal information relating to you.

 

F.	Residential history
	Provide all residential addresses for the past 10 YEARS starting with your current principal residential address.  If you are unable to recall the complete residential address for a period, which is beyond 5 years from the date of completion of this Form, the municipality and province or state and country must be identified.  The funding portal reserves the right to require the full address.
	Street address, city, province/state, country & postal/zip code	From		To
		MM	YY	MM	YY

 

		Yes	No
2.	Citizenship
	(i)         Are you a Canadian citizen?
	(ii)        Are you a person lawfully in Canada as an immigrant but are not yet a Canadian citizen?
	(iii)       If “Yes” to Question 2(ii), the number of years of continuous residence in Canada:
	(iv)       Do you hold citizenship in any country other than Canada?
	(v)        If “Yes” to Question 2(iv), the name of the country(ies):

 

 

 

 

 

3.	Employment history
Provide your complete employment history for the 5 YEARS immediately prior to the date of this Form starting with your current employment.  Use an attachment if necessary.  If you were unemployed during this period of time, state this and identify the period of unemployment.
Employer name		Employer address	Position held	From		To
				MM	YY	MM		YY

 

						Yes	No
4.	Involvement with issuers
A.	Are you or have you during the last 10 years ever been a director, officer, promoter, insider or control person for any issuer?
B.	If “YES” to 4A above, provide the names of each issuer.  State the position(s) held and the period(s) during which you held the position(s).  Use an attachment if necessary.
	Name of issuer	Position(s) held	Market traded on	From		To
				MM	YY	MM		YY
C.	While you were a director, officer or insider of an issuer, did any exchange or other self-regulatory entity ever refuse approval for listing or quotation of the issuer, including (i) a listing resulting from a business combination, reverse takeover or similar transaction involving the issuer that is regulated by an SRE or SRA, (ii) a backdoor listing or qualifying acquisition involving the issuer (as those terms are defined in the TSX Company Manual as amended from time to time) or (iii) a qualifying transaction, reverse takeover or change of business involving the issuer (as those terms are defined in the TSX Venture Corporate Finance Manual as amended from time to time)?  If yes, attach full particulars.					Yes		No

 

5.	Educational history
A.	Professional designation(s)
	Identify any professional designation held and professional associations to which you belong, for example, Barrister & Solicitor, C.P.A., C.A., C.M.A., C.G.A., P.Eng., P.Geol., CFA, etc. and indicate which organization and the date the designations were granted.
	Professional Designation and Membership Number	Grantor of designation and Canadian or Foreign Jurisdiction	Date granted
			MM	YY
	Describe the current status of any designation and/or association (e.g. active, retired, non-practicing, suspended).

 

 

B.	Provide your post-secondary educational history starting with the most recent.
	School	Location	Degree or diploma	Date obtained
				MM		DD		YY

             

		Yes	No
6.	Offences
If you answer “YES” to any item in Question 6, you must provide complete details in an attachment.  If you have received a pardon under the Criminal Records Act (Canada) for an Offence that relates to fraud (including any type of fraudulent activity), misappropriation of money or other property, theft, forgery, falsification of books or documents or similar Offences, you must disclose the pardoned Offence in this Form.
A.	Have you ever, in any Canadian or foreign jurisdiction, pled guilty to or been found guilty of an Offence?
B.	Are you the subject of any current charge, indictment or proceeding for an Offence, in any Canadian or foreign jurisdiction?
C.	To the best of your knowledge, are you currently or have you ever been a director, officer, promoter, insider, or control person of an issuer, in any Canadian or foreign jurisdiction, at the time of events that resulted in the issuer:
	(i)         pleading guilty to or being found guilty of an Offence?
	(ii)        now being the subject of any charge, indictment or proceeding for an alleged Offence?

 

 

		Yes	No
7.	Bankruptcy
If you answer “YES” to any item in Question 7, you must provide complete details in an attachment and attach a copy of any discharge, release or other applicable document.  You must answer “YES” or “NO” for EACH of (A), (B) and (C) below.
A.	Have you, in any Canadian or foreign jurisdiction, within the past 10 years had a petition in bankruptcy issued against you, made a voluntary assignment in bankruptcy, made a proposal under any bankruptcy or insolvency legislation, been subject to any proceeding, arrangement or compromise with creditors, or had a receiver, receiver-manager or trustee appointed to manage your assets?
B.	Are you now an undischarged bankrupt?
C.	To the best of your knowledge, are you currently or have you ever been a director, officer, promoter, insider, or control person of an issuer, in any Canadian or foreign jurisdiction, at the time of events, or for a period of 12 months preceding the time of events, where the issuer:
	(i)         has made a petition in bankruptcy, a voluntary assignment in bankruptcy, a proposal under any bankruptcy or insolvency legislation, been subject to any proceeding, arrangement or compromise with creditors or had a receiver, receiver-manager or trustee appointed to manage the issuer’s assets?
	(ii)        is now an undischarged bankrupt?

 

		Yes	No
8.	Proceedings
If you answer “YES” to any item in Question 8, you must provide complete details in an attachment.
A.	Current proceedings by securities regulatory authority or self regulatory entity. Are you now, in any Canadian or foreign jurisdiction, the subject of:
	(i)         a notice of hearing or similar notice issued by an SRA or SRE?
	(ii)        a proceeding of or, to your knowledge, an investigation by, an SRA or SRE?
	(iii)       settlement discussions or negotiations for settlement of any nature or kind whatsoever with an SRA or SRE?
B.	Prior proceedings by securities regulatory authority or self regulatory entity.  Have you ever:
	(i)         been reprimanded, suspended, fined, been the subject of an administrative penalty, or been the subject of any proceedings of any kind whatsoever, in any Canadian or foreign jurisdiction, by an SRA or SRE?
	(ii)        had a registration or licence for the trading of securities, exchange or commodity futures contracts, real estate, insurance or mutual fund products cancelled, refused, restricted or suspended by an SRA or SRE?
	(iii)       been prohibited or disqualified by an SRA or SRE under securities, corporate or any other legislation from acting as a director or officer of a reporting issuer or been prohibited or restricted by an SRA or SRE from acting as a director, officer or employee of, or an agent or consultant to, a reporting issuer?
	(iv)       had a cease trading or similar order issued against you or an order issued against you by an SRA or SRE that denied you the right to use any statutory prospectus or registration exemption?
	(v)        had any other proceeding of any kind taken against you by an SRA or SRE?
C.	Settlement agreement(s)
	Have you ever entered into a settlement agreement with an SRA, SRE, attorney general or comparable official or body, in any Canadian or foreign jurisdiction, in a matter that involved actual or alleged fraud, theft, deceit, misrepresentation, conspiracy, breach of trust, breach of fiduciary duty, insider trading, unregistered trading in securities or exchange or commodity futures contracts, illegal distributions, failure to disclose material facts or changes or similar conduct, or any other settlement agreement with respect to any other violation of securities legislation in a Canadian or foreign jurisdiction or the rules, by-laws or policies of any SRE?
D.	To the best of your knowledge, are you now or have you ever been a director, officer, promoter, insider, or control person of an issuer at the time of such event, in any Canadian or foreign jurisdiction, for which a securities regulatory authority or self-regulatory entity has:
	(i)         refused, restricted, suspended or cancelled the registration or licensing of an issuer to trade securities, exchange or commodity futures contracts, or to sell or trade real estate, insurance or mutual fund products?
	(ii)        issued a cease trade or similar order or imposed an administrative penalty of any nature or kind whatsoever against the issuer, other than an order for failure to file financial statements that was revoked within 30 days of its issuance?
	(iii)       refused a receipt for a prospectus or other offering document, denied any application for listing or quotation or any other similar application, or issued an order that denied the issuer the right to use any statutory prospectus or registration exemptions?
	(iv)       issued a notice of hearing, notice as to a proceeding or similar notice against the issuer?
	(v)        commenced any other proceeding of any kind against the issuer, including a trading halt, suspension or delisting of the issuer, in connection with an alleged or actual contravention of an SRA’s or SRE’s rules, regulations, policies or other requirements, but excluding halts imposed (i) in the normal course for proper dissemination of information, or (ii) pursuant to a business combination, reverse takeover or similar transaction involving the issuer that is regulated by an SRE or SRA, including a qualifying transaction, reverse takeover or change of business involving the issuer (as those terms are defined in the TSX Venture Corporate Finance Manual as amended from time to time)?
	(vi)       entered into a settlement agreement with the issuer in a matter that involved actual or alleged fraud, theft, deceit, misrepresentation, conspiracy, breach of trust, breach of fiduciary duty, insider trading, unregistered trading in securities or exchange or commodity futures contracts, illegal distributions, failure to disclose material facts or changes or similar conduct by the issuer, or any other violation of securities legislation or the rules, by-laws or policies of an SRE?

 

		Yes	No
9.	Civil proceedings
If you answer “YES” to any item in Question 9, you must provide complete details in an attachment.
A.	Judgment, garnishment and injunctions Has a court in any Canadian or foreign jurisdiction:
	(i)         rendered a judgment, ordered garnishment or issued an injunction or similar ban (whether by consent or otherwise) against you in a claim based in whole or in part on fraud, theft, deceit, misrepresentation, conspiracy, breach of trust, breach of fiduciary duty, insider trading, unregistered trading, illegal distributions, failure to disclose material facts or changes, or allegations of similar conduct?
	(ii)        rendered a judgment, ordered garnishment or issued an injunction or similar ban (whether by consent or otherwise) against an issuer, of which you are currently or have ever been a director, officer, promoter, insider or control person in a claim based in whole or in part on fraud, theft, deceit, misrepresentation, conspiracy, breach of trust, breach of fiduciary duty, insider trading, unregistered trading, illegal distributions, failure to disclose material facts or changes, or allegations of similar conduct?
B.	Current claims
	(i)         Are you now subject, in any Canadian or foreign jurisdiction, to a claim that is based in whole or in part on actual or alleged fraud, theft, deceit, misrepresentation, conspiracy, breach of trust, breach of fiduciary duty, insider trading, unregistered trading, illegal distributions, failure to disclose material facts or changes, or allegations of similar conduct?
	(ii)        To the best of your knowledge, are you currently or have you ever been a director, officer, promoter, insider or control person of an issuer that is now subject, in any Canadian or foreign jurisdiction, to a claim that is based in whole or in part on actual or alleged fraud, theft, deceit, misrepresentation, conspiracy, breach of trust, breach of fiduciary duty, insider trading, unregistered trading, illegal distributions, failure to disclose material facts or changes, or allegations of similar conduct?

 

 

 

C.	Settlement agreement
	(i)         Have you ever entered into a settlement agreement, in any Canadian or foreign jurisdiction, in a civil action that involved actual or alleged fraud, theft, deceit, misrepresentation, conspiracy, breach of trust, breach of fiduciary duty, insider trading, unregistered trading, illegal distributions, failure to disclose material facts or changes, or allegations of similar conduct?
	(ii)        To the best of your knowledge, are you currently or have you ever been a director, officer, promoter, insider or control person of an issuer that has entered into a settlement agreement, in any Canadian or foreign jurisdiction, in a civil action that involved actual or alleged fraud, theft, deceit, misrepresentation, conspiracy, breach of trust, breach of fiduciary duty, insider trading, unregistered trading, illegal distributions, failure to disclose material facts or changes, or allegations of similar conduct?

 

		Yes	No
10.	Involvement with other entities
A.	Has your employment in a sales, investment or advisory capacity with any employer engaged in the sale of real estate, insurance or mutual funds ever been suspended or terminated for cause?  If yes, attach full particulars.
B.	Has your employment with a firm or company registered under the securities laws of any Canadian or foreign jurisdiction as a securities dealer, broker, investment advisor or underwriter, ever been suspended or terminated for cause?  If yes, attach full particulars.
C.	Has your employment as an officer of an issuer ever been suspended or terminated for cause?  If yes, attach full particulars.