OSC LaunchPad aims to help you understand what you need to know about securities regulation, and we also want to learn about innovations in the fintech space from you. We will engage with you, both informally through events and formally through a request for support. You can help us identify areas where we can evolve our requirements to better reflect the changing needs and abilities of businesses operating in this new era of digital innovation.
OSC LaunchPad aims to create more flexibility for innovative fintech business models to get to market while ensuring appropriate investor protections are in place.
Here are examples of our modern approach to regulation:
Online advisers provide discretionary investment management services at a low cost to everyday investors through an interactive website.
We have worked with many online advisers to meet their obligations in an online space. We require all advisers to perform “KYC” (know-your-client) and to have meaningful discussions with their clients to assess their financial suitability for an investment. This has traditionally meant face-to-face conversations.
However, we recognize that many firms now use alternative communication methods (e.g. telephone, video link, email, or internet chat, or, under certain conditions, setting up well-designed online KYC questionnaires to onboard clients) to achieve the same results.
Online advisers can now refer to CSA Staff Notice 31-342 Guidance for Portfolio Managers Regarding Online Advice.
In Ontario, loans (or portions of loans) are considered securities, and lenders who fund these loans are considered investors.
Although lending platforms (including “peer-to-peer” lending platforms) are subject to securities regulation, we recognize that these are unique lending businesses that often don't fit neatly into our existing regulatory framework.
We have worked with these firms to help them satisfy regulatory requirements such as “KYP” (know-your-product), including how to conduct due diligence on a loan, and how to build safeguards into online platforms to protect investors from overinvesting or investing in loans that are too risky.
Online Venture Capital Raising Platforms
Venture capital raising provides an alternative fundraising opportunity for start-ups and small- and medium-sized companies in Ontario, and may be a suitable investment for sophisticated and experienced investors.
The Commission recognizes that to keep abreast of and facilitate innovation, an environment to test novel business models, products, and services is required. In view of this, we have provided time-limited registration, as a restricted dealer, to an online platform that allows accredited investors who have venture capital investing experience to invest in Canadian tech start-ups that are participating in, or have completed, an Approved Incubator Program such as Next Canada, Creative Destruction Lab, York Entrepreneurship Development Institute’s Incubator Track, and Ontario Centres of Excellence’s Market Readiness Program.
We have also granted the platform relief from certain securities requirements for a test period of two years. This relief was granted in view of the unique nature of the business, including the Approved Incubator Programs’ role as a credible vetting source, the sophistication of the investors and their ability to understand the risks of investing, and the fact that the platform does not handle money or assets.
Such requirements may or may not be appropriate for another venture capital raising platform and each business model would need to be reviewed separately.
Chief of OSC LaunchPad