OSC tests new early-stage exemptions

As part of its commitment to foster capital formation, the Ontario Securities Commission (OSC) launched a pair of new exemptions, targeting early-stage businesses.

Last week, the OSC unveiled its new strategic plan for the next six years, which featured a pledge to ensure that the regulatory environment is conducive to business growth and innovation.

On Thursday, the regulator followed through with a couple of new dealer registration exemptions — a new early-stage business exemption, and a non-profit angel investor group exemption — alongside a reporting exemption for distributions made under the self-certified investor prospectus exemption (which was due to expire in April and was recently extended until October 2025).

Specifically, the OSC introduced a new exemption that allows non-profit angel investor groups to trade securities issued by a startup without being registered as dealers, subject to certain conditions, including limits on the compensation they can receive.

The regulator adopted a similar exemption for certain early-stage businesses, which will allow these kinds of companies to market their own securities offerings without registering as dealers. The exemption is also subject to conditions, including a $3-million limit on these kinds of offerings.

“New and growing businesses play an essential role in our economy, contributing to job creation and driving productivity gains through innovation and competition,” said Grant Vingoe, CEO of the OSC, in a release. “These initiatives reflect the OSC’s commitment to fostering the conditions for growth and innovation in Ontario’s capital markets without compromising investor protection, as outlined in our recently released strategic plan.”

The new exemptions are being adopted as part of the regulator’s experimental environment, known as OSC TestLab, which aims to facilitate innovation by allowing companies to test products and services without first meeting the full regulatory requirements that would ordinarily apply.

“The OSC TestLab initiatives will provide important insights as we work to support access to finance at all stages of business growth,” said Leslie Byberg, executive vice-president, strategic regulation, with the OSC.

“The data and information collected will help inform future policymaking, including promoting access to capital for early-stage businesses in Ontario while also ensuring investor protections,” she said.

The exemptions will be in effect until October 2025.