Securities Law & Instruments

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Ontario Securities Commission

Ontario Instrument 45-505

Relief in Respect of the Distribution of Securities Through a Funding Portal Operated by Silver Maple Ventures Inc.

The Ontario Securities Commission, considering that to do so would not be prejudicial to the public interest, orders that effective May 28, 2020 Ontario Instrument 45-505 entitled "Relief in respect of the distribution of securities through a funding portal operated by Silver Maple Ventures Inc." is made.

May 28, 2020

"Grant Vingoe"
Acting Chair
"Tim Moseley"
Vice-Chair

Authority under which the order is made:

Act and section: Securities Act, subsection 143.11(2)

Ontario Securities Commission

Ontario Instrument 45-505 Relief in Respect of the Distribution of Securities Through a Funding Portal Operated by Silver Maple Ventures Inc. (the Order)

Background

The Ontario Securities Commission (the Commission) has received an application from Silver Maple Ventures Inc. (the Filer) for an order pursuant to section 74 of the Securities Act (Ontario) (the Act) that, in connection with the distribution of securities by an issuer (each, an Issuer) through the funding portal operated by the Filer, a distribution of a security of the Issuer be exempt from the requirement in section 53 of the Act to file a prospectus (the Exemption Sought).

On November 27, 2019, the Filer was granted substantially similar relief by the Commission pursuant to section 74 of the Act (the November Order). However, because the Commission did not at the time have authority to issue an order of general application, the relief was limited to specified issuers with which the Filer had an established relationship and which were included on a list provided to Commission staff (the List).

Since the Exemption Sought is intended to apply to any Issuer, provided that the conditions of this Order are satisfied, it requires that the Commission grant class relief pursuant to subsection 143.11(2) of the Act. This Order revokes the November Order and grants the Exemption Sought to all Issuers, being a class of Issuers, pursuant to subsection 143.11(2) of the Act.

Interpretation

1. Terms defined in the Act or National Instrument 14-101 -- Definitions have the same meaning if used in this Order, unless otherwise defined.

2. In this Order:

"BC Instrument 45-535" means British Columbia Securities Commission Instrument 45-535 Start-up Crowdfunding Registration and Prospectus Exemptions;

"closing of the distribution" means, at the discretion of the Issuer, any time after the minimum offering amount is reached;

"corresponding start-up crowdfunding order" means:

(a) BC Instrument 45-535;

(b) an order issued or a rule adopted by another securities regulatory authority or regulator in Canada, the terms of which are substantially similar to BC Instrument 45-535; and

(c) Alberta Securities Commission Rule 45-517 Prospectus Exemption for Start-up Businesses;

"eligible security" means:

(a) a common share,

(b) a non-convertible preference share,

(c) a security convertible into a security referred to in (a) or (b),

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

(e) a unit of a limited partnership;

"funding portal" means a person or company through which a start-up crowdfunding distribution is made;

"issuer group" means

(a) an Issuer,

(b) an affiliate of the Issuer, and

(c) any other issuer

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

(ii) whose business is founded or organized, directly or indirectly, by the same person or persons who founded or organized the Issuer;

"minimum offering amount" means the minimum amount disclosed in the offering document;

"offering document" means a completed Form 1 Offering Document, attached as Appendix 1 to this Order, as amended from time to time;

"participating jurisdictions" means British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Québec, New Brunswick, Nova Scotia and any other jurisdiction whose securities regulatory authority or regulator has adopted a corresponding start-up crowdfunding order;

"principal" means a promoter, director, officer or control person;

"risk warning" means the Form 2 Risk Acknowledgement, attached as Appendix 2 to this Order; and

"start-up crowdfunding distribution" means a distribution through the funding portal operated by the Filer that is exempt from the prospectus requirement under this Order or a distribution through a funding portal under a corresponding start-up crowdfunding order.

Representations

This Order is based on the following facts represented by the Filer:

1. The Filer was incorporated under the Business Corporations Act (British Columbia) on October 18, 2013;

2. The Filer's head office is at 300-289 Abbott Street, Vancouver, British Columbia, V6B 5L1;

3. Since May 27, 2015, the Filer has owned and operated the funding portal known as "FrontFundr";

4. The Filer is registered as an exempt market dealer under National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations in each of British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec, New Brunswick and Nova Scotia;

5. To date, the Filer has facilitated 21 start-up crowdfunding distributions through its funding portal pursuant to BC Instrument 45-535;

6. Lendified Holdings Inc. (Lendified), an issuer with which the Filer had an established relationship at the time that the Commission granted the November Order, was inadvertently not included on the List provided to staff. On April 17, 2020, Lendified filed a Form 45-106F1 Report of Exempt Distribution with the Commission that discloses sales to Ontario purchasers that were completed over the FrontFundr funding portal pursuant to the November Order. When this discrepancy was brought to the Filer's attention by Commission staff, the Filer acknowledged its error in not verifying that Lendified was included on the List prior to distributing securities on Lendified's behalf. The Filer confirmed that Lendified was alerted to the error; and

7. The Filer requests that the Exemption Sought be granted on substantially similar conditions as required for issuers relying on the prospectus exemption contained in BC Instrument 45-535.

Order

The Commission is satisfied that it would not be prejudicial to the public interest to make an order pursuant to subsection 143.11(2) of the Act granting the Exemption Sought to a class of Issuers.

1. The decision of the Commission under the Act is that the November Order is revoked and the Exemption Sought is granted in respect of a distribution by an Issuer provided that:

1.1. With respect to an Issuer, the following conditions are satisfied:

(a) the distribution is of an eligible security of the Issuer's own issue;

(b) the distribution and payment for the eligible security is facilitated through the funding portal operated by the Filer known as "FrontFundr";

(c) the Issuer is not a reporting issuer or an investment fund in any jurisdiction of Canada or foreign jurisdiction;

(d) the head office of the Issuer is located in a participating jurisdiction;

(e) the aggregate funds raised in any start-up crowdfunding distribution by a person or company in the issuer group does not exceed $250,000;

(f) the issuer group completes no more than two start-up crowdfunding distributions in a calendar year;

(g) the distribution occurs no later than the 90th day after the first date the offering document is made available on the Filer's website;

(h) the Issuer uses an offering document to conduct the distribution and provides the offering document to the Filer for the purpose of making it available to a purchaser through the funding portal's website;

(i) the Issuer amends the offering document in the event the offering document is no longer true and provides it to the Filer as soon as practicable for the purpose of making it available to a purchaser through the Filer's website;

(j) the Issuer provides a purchaser with a contractual right to withdraw an offer to purchase an eligible security that may be exercised by the purchaser delivering a notice to the Filer within 48 hours of (i) the purchaser's subscription or (ii) the Filer notifying the purchaser that the offering document has been amended;

(k) the offering document discloses how the Issuer intends to use the funds raised and the minimum offering amount to close the distribution;

(l) the issuer raises the minimum offering amount described in the offering document, which may be reduced by the amount of any concurrent distribution made under a prospectus exemption other than the prospectus exemption set out in this Order and a corresponding start-up crowdfunding order, provided that the funds from the concurrent distribution are unconditionally available to the Issuer;

(m) no concurrent start-up crowdfunding distribution is made by any person or company in the issuer group for the purpose described in the offering document;

(n) no commission, fee or other amounts are paid to the issuer group or any of their principals, employees or agents with respect to the distribution;

(o) a principal of the issuer group is not a principal of the Filer;

(p) each purchaser invests no more than:

(i) $1,500; or

(ii) $5,000, provided that the purchaser has obtained advice from a registered dealer that such investment is suitable for that person;

(q) within 30 days after the closing of the distribution, the Issuer delivers or causes to be delivered to each purchaser a confirmation setting out the following:

(i) the date of subscription and the closing of the distribution;

(ii) the quantity and description of the eligible security purchased;

(iii) the price per eligible security paid by the purchaser; and

(iv) the total commission, fee and any other amounts paid by the Issuer to the Filer in respect of the distribution;

(r) the Issuer files no later than the 30th day after the closing of the distribution:

(i) the offering document; and

(ii) a report in Form 45-106F1 Report of Exempt Distribution.

1.2 With respect to the Filer, the Filer:

(a) prior to allowing any person entry to its website, requires the person to acknowledge that they are entering a website of a funding portal:

(i) that is operated by a registered dealer under Canadian securities legislation, and

(ii) that will provide advice about the suitability of the eligible security;

(b) receives payment for an eligible security electronically through the funding portal operated by the Filer;

(c) takes reasonable measures to ensure that the Issuer and the purchaser are residents of a participating jurisdiction where the offering document is made available;

(d) makes the offering document and the risk warning available to a purchaser through the funding portal operated by the Filer;

(e) does not allow a purchaser to subscribe for an eligible security until the purchaser confirms that the purchaser has read and understands the offering document and the risk warning;

(f) notifies a purchaser of any amendment to the offering document and the right of the purchaser to withdraw their subscription after receiving notification of the amendment;

(g) returns all funds to a purchaser within five business days of receiving a withdrawal notification from the purchaser;

(h) does not receive a commission, fee or other amount from a purchaser of an eligible security; and

(i) completes one the following:

(i) if the minimum offering amount has not been raised by the 90th day after the offering document is first made available on the funding portal operated by the Filer or the distribution is withdrawn, no later than five business days following such occurrence:

(A) returns, or causes to return, all funds to each purchaser, and

(B) notifies the Issuer and each purchaser that funds have been returned,

(ii) if each 48-hour period described in section 1(j) above has elapsed,

(A) releases, or causes to release, all funds due to the Issuer at the closing of the distribution, and

(B) no later than fifteen days after the closing of the distribution:

1. notifies each purchaser that the funds have been released to the Issuer, and

2. provides the Issuer with all information required to file the report described in section 1(r)(ii) above.

2. The decision of the Commission is that the first trade of a security acquired under this Order is subject to section 2.5 of National Instrument 45-102 Resale of Securities.

Effective date and term

This decision comes into effect on this 28th day of May, 2020 and will cease to be effective on the earlier of the following:

(a) the date that is 18 months after the date of this Order unless extended by the Commission, and

(b) the effective date of proposed National Instrument 45-110 Start-up Crowdfunding Registration and Prospectus Exemptions.

Appendix 1

Form 1 Start-Up Crowdfunding -- Offering Document

GENERAL INSTRUCTIONS:

(1) Filing Instructions

An issuer relying on the start-up crowdfunding prospectus exemption is required to file the offering document no later than the 30th day after the closing of the distribution as follows:

In all participating jurisdictions (except British Columbia and Ontario) -- file this form through the System for Electronic Document Analysis and Retrieval (SEDAR) in accordance with National Instrument 13-101 System for Electronic Document Analysis and Retrieval (SEDAR).

In British Columbia -- through BCSC eServices at https://www.bcsc.bc.ca.

In Ontario -- through the OSC Electronic Filing Portal at https://www.osc.gov.on.ca/filings

This offering document and all amendments must be filed where the issuer has made a start-up crowdfunding distribution, as well as in the participating jurisdiction where the issuer's head office is located.

(2) This offering document must be completed and certified by an authorized individual on behalf of the issuer.

(3) Draft this offering document so that it is easy to read and understand. Be concise and use clear, plain language. Avoid technical terms.

(4) Conform as closely as possible to the format set out in this form. Address the items in the order set out below. No variation of headings, numbering or information set out in the form is allowed and all are to be displayed as shown.

(5) This offering document is to be provided to your funding portal which has to make it available on its website. If the information contained in this offering document no longer applies or is no longer true, you must immediately amend the document and send the new version to the funding portal.

Item 1: RISKS OF INVESTING

1.1 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 offering document. Any representation to the contrary is an offence. This is a risky investment."

Item 2: THE ISSUER

2.1 Provide the following information for the issuer:

(a) Full legal name as it appears in the issuer's organizing documents,

(b) Head office address,

(c) Telephone,

(d) Fax, and

(e) Website URL.

2.2 Provide the following information for a contact person of the issuer who is able to answer questions from purchasers and security regulatory authority or regulator:

(a) Full legal name (first name, middle name and last name),

(b) Position held with the issuer,

(c) Business address,

(d) Business telephone,

(e) Fax, and

(f) Business e-mail.

Item 3: BUSINESS OVERVIEW

3.1 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: MANAGEMENT

4.1 Provide the information in the following table for each promoter, director, officer and control person of the issuer:

Full legal name municipality of residence and position at issuer

Principal occupation for the last five years

Expertise, education, and experience that is relevant to the issuer's business

Number and type of securities of the issuer owned

Date securities were acquired and price paid for the securities

Percentage of the issuer's securities held as of the date of this offering document

__________

__________

__________

__________

__________

__________

4.2 State whether each person listed in item 4.1 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, or

(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,

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

Item 5: START-UP CROWDFUNDING DISTRIBUTION

5.1 Provide the name of the funding portal the issuer is using to conduct its start-up crowdfunding distribution.

5.2 List the name of all the participating jurisdictions (Canadian province or territory) where the issuer intends to raise funds and make this offering document available.

5.3 Provide the following information with respect to the start-up crowdfunding distribution:

(a) the date before which the issuer must have raised the minimum offering amount for the closing of the distribution (no later than 90 days after the date this offering document is made available on the funding portal), and

(b) the date(s) and description of any amendment(s) made to this offering document, if any.

5.4 Indicate the type of eligible securities offered.

5.5 The eligible securities offered provide the following rights (choose all that apply):

[ ] Voting rights,

[ ] Dividends or interests (describe any right to receive dividends or interest),

[ ] Rights on dissolution,

[ ] Conversion rights (describe what each security is convertible into),

[ ] Other (describe the rights).

5.6 Provide a brief summary of any other material restrictions or conditions that attach to the eligible securities being offered, such as tag-along, drag along or pre-emptive rights.

5.7 In a table, provide the following information:

Total amount ($)

Total number of eligible securities issuable

Minimum offering amount

Maximum offering amount

Price per eligible security

5.8 Indicate the minimum investment amount per purchaser, if any.

5.9 Include the following statement, in bold type:

"Note: The minimum offering amount stated in this offering document may be satisfied with funds that are unconditionally available to [insert name of issuer] that are raised by concurrent distributions using other prospectus exemptions without having to amend this offering document."

Item 6: ISSUER'S BUSINESS

6.1 Describe the issuer's business. Provide details about the issuer's industry and operations.

6.2 Describe the legal structure of the issuer and indicate the jurisdiction where the issuer is incorporated or organized.

6.3 Indicate where the issuer's articles of incorporation, limited partnership agreement, shareholder agreement or similar document are available to purchasers.

6.4 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.

6.5 Indicate whether the issuer has financial statements available. If yes, include the following statement, in bold type:

"Information for purchasers: If you receive financial statements from an issuer conducting a start-up crowdfunding distribution, you should know that those financial statements have not been provided to or reviewed by a securities regulatory authority or regulator. They are not part of this offering document. You should ask the issuer which accounting standards were used to prepare the financial statements and whether the financial statements have been audited. You should also consider seeking advice of an accountant or an independent financial adviser about the information in the financial statements."

6.6 Describe the number and type of securities of the issuer outstanding as at the date of the offering document. If there are securities outstanding other than the eligible securities being offered, please describe those securities.

Item 7: USE OF FUNDS

7.1 Provide information on all funds previously raised and how they were used by the issuer.

7.2 Using the following table, provide a detailed breakdown of how the issuer will use the funds from this start-up crowdfunding distribution. If any of the funds will be paid directly or indirectly to a promoter, director, officer or control person of the issuer, disclose in a note to the table the name of the person, the relationship to the issuer and the amount. If more than 10% of the available funds will be used by the issuer to pay debt and the issuer incurred the debt within the two preceding financial years, describe why the debt was incurred.

Description of intended use of funds listed in order or priority

Total amount ($)

Assuming minimum offering amount

Assuming maximum offering amount

____________________

_______________

_______________

Item 8: PREVIOUS START-UP CROWDFUNDING DISTRIBUTIONS

8.1 For each start-up crowdfunding distribution in which the issuer and each promoter, director, officer and control person of the issuer have been involved in any of the participating jurisdictions in the past five years, provide the information below:

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

(b) the name of the funding portal, and

(c) whether the distribution successfully closed, was withdrawn by the issuer or did not close because the minimum offering amount was not reached and the date on which any of these occurred.

Item 9: COMPENSATION PAID TO FUNDING PORTAL

9.1 Describe the commission, fee and any other amounts expected to be paid by the issuer to the funding portal for this start-up crowdfunding distribution.

Item 10: RISK FACTORS

10.1 Describe in order of importance, starting with the most important, the main risks of investing in the issuer's business for the purchasers.

Item 11: REPORTING OBLIGATIONS

11.1 Describe the nature and frequency of any disclosure of information the issuer intends to provide to purchasers after the closing of the distribution and explain how purchasers can access this information.

Item 12: RESALE RESTRICTIONS

12.1 Include the following statement, in bold type:

"The securities you are purchasing are subject to a resale restriction. You may never be able to resell the securities."

Item 13: PURCHASERS' RIGHTS

13.1 Include the following statement, in bold type:

"If you purchase these securities, your rights may be limited and you will not have the same rights that are attached to a prospectus under applicable securities legislation. For information about your rights you should consult a lawyer.

You can cancel your agreement to purchase these securities. To do so, you must send a notice to the funding portal within 48 hours of your subscription. If there is an amendment to this offering document, you can cancel your agreement to purchase these securities by sending a notice to the funding portal within 48 hours of receiving notice of the amendment.

The offering of securities described in this offering document is made pursuant to a start-up crowdfunding prospectus exemption under Ontario Instrument 45-505 exempting the issuer from the prospectus requirement.

Item 14: DATE AND CERTIFICATE

14.1 Include the following statement, in bold type:

"On behalf of the issuer, I certify that the statements made in this offering document are true."

14.2 Provide the signature, date of the signature, name and position of the authorized individual certifying this offering document.

14.3 If this offering document is signed electronically, include the following statement, in bold type:

"I acknowledge that I am signing this 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."

Questions:

Refer any questions to:

Ontario Securities Commission
20 Queen Street West, 22nd Floor
Toronto, Ontario
Toll free: 1-877-785-1555
E-mail: inquiries@osc.gov.on.ca
Website: www.osc.ca

Appendix 2

Form 2 Start-Up Crowdfunding -- Risk Acknowledgement

Issuer Name:

Type of Eligible Security offered:

- - - - - - - - - - - - - - - - - - - -

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 acknowledgment

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?

_____

_____

No income -- Do you understand that you may not earn any income, such as dividends or interest, on 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 not be provided with any ongoing information about the issuer and/or this investment?

_____

_____

2. No approval and no advice [Instructions: Delete "no advice" if the funding portal is operated by a registered dealer.]

No approval -- Do you understand that this investment has not been reviewed or approved in any way by a securities regulator?

_____

_____

No advice -- Do you understand that you will not receive advice about your investment? [Instructions: Delete if the funding portal is operated by a registered 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 acknowledgement

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?

_____

_____

First and last name:

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.

5. Additional information

You have 48 hours to cancel your purchase by sending a notice to the funding portal at: [Instructions: Provide email address or fax number where purchasers can send their notice. Describe any other manner for purchasers to cancel their purchase.]

If you want more information about your local securities regulation, go to <<www.securities-administrators.ca>>. Securities regulators do not provide advice on investment.

To check if the funding portal is operated by a registered dealer, go to <<www.aretheyregistered.ca>><<[Instructions: Delete if the funding portal is not operated by a registered dealer.]>>