New Canadian crowdfunding rules “a watershed moment” for investors
Canada’s regulator has relaxed its restrictions on equity crowdfunding, in what has been described as “a watershed moment” for investors.
The Canadian Securities Administrators (CSA) has increased the maximum investment amount that can be invested in securities crowdfunding, and tripled the maximum amount that a company can earn through crowdfunding.
Companies can now raise up to $1.5m (£880,000) per year, up from $500,000 previously; while investors can place $2,500 in crowdfunding investments – up from $1,500.
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There is also now a higher limit of $10,000 if a registered dealer advises that the investment is suitable for the purchaser.
“This is a watershed moment for Canadian investment crowdfunding,” said Peter-Paul Van Hoeken, chief executive of Canadian crowdfunding platform FrontFundr.
“We have seen the immense value and impact that harmonized crowdfunding rules have had in the US and the UK, and so we are really excited to work with Canadian companies and investors to help create the same sort of environment over here.”
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Following stakeholder consultation, the CSA made targeted amendments to improve the effectiveness of start-up crowdfunding as a capital raising tool.
The CSA has also removed barriers preventing federal and provincial co-operatives or associations from using the start-up crowdfunding prospectus exemption.
“These rules expand the ability of small businesses and start-ups to use securities crowdfunding to gain access to capital,” said Louis Morisset, chair of the CSA and president and chief executive of the Autorité des Marchés Financiers.
Canada has a thriving fintech community but its crowdfunding and peer-to-peer lending markets have lagged behind those in the US and UK.
The country’s first P2P consumer lender – GoPeer – launched last year in Ontario and Quebec. It joined business lenders Lending Loop, Upstart and Borrowell.
Business P2P lender Funding Circle had planned to enter the Canadian market in 2019 before putting its plans on hold to focus on its existing operations.
