The Ontario Securities Commission has granted its first-ever approval for an online investment platform that connects social- and economic-impact businesses to accredited investors, such as venture capitalists.
The portal is called MaRS VX, and it works like an online dating site, matching as it does investors with companies in Ontario that meet MaRS's financial, social-impact and governance standards. The platform caters to both for- and non-profit organizations tackling problems such as climate change, persons with disabilities or poverty. Issuers must also have less than $25-million in revenue.
Start-up incubator MaRS Discovery District is behind this not-for-profit initiative that provides investors a single access point to potential investments located across the province.
"Ultimately we wanted to create a market for good, said Adam Spence, a manager of special projects at MaRS who worked on the platform.
It took MaRS's social-impact investing team about six years to develop the platform with partners such as the Ontario government, TMX Group Ltd. and Torys LLP law firm. Mr. Spence said MaRS VX is modelled on similar platforms in London and Singapore, but he said this is the first program registered by a regulator. MaRS VX will be registered as a restricted dealer with the OSC.
"Previously, the businesses would have had to go through the normal channels of prospectus-qualified or exempt-market activity, where they have to go out and find investors. This allows them to be brought together to facilitate the capital-raising," said Deb Foubert, the director of compliance and registrant regulation at the OSC. She added that the OSC was focused on investor protection when considering its approval, and having the backing of the Ontario government and MaRS "provided additional comfort."
Joining the program is free to investors once they are verified by MaRS as "patient capitalists" with an interest in having an impact as well as the potential for financial return. Companies pay a fee that covers some of MaRS's costs.
Once issuers secure investments, they're required to report biannually to investors on their finances and their impact, said Mr. Spence. "Having that kind of ongoing reporting requirement means these folks are engaged in good governance practices and using their money for the purposes indicated."
Should a company require more financing for additional projects, they must reapply and undergo another review.
Ms. Foubert said it's possible this decision will prompt applications from other online platforms. "The OSC has taken an innovative approach. We realize there's an issue regarding capital-raising and we're trying to find innovative solutions for Ontario issuers."
The first group of issuers and investors on the MaRS VX will launch publicly in September. The beta version will get under way in the next few weeks.
(Jacqueline Nelson is a Globe and Mail Financial Services Reporter.)
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