Skip to main content
The Globe and Mail
Get full access to globeandmail.com
Support quality journalism
Just $1.99 per week for the first 24 weeks
Just $1.99 per week for the first 24 weeks
The Globe and Mail
Support quality journalism
Get full access to globeandmail.com
Globe and Mail website displayed on various devices
Just$1.99
per week
for the first 24 weeks

var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(select.open)}function setPanelState(o){dom.root.classList[o?"add":"remove"](select.open),dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){console.log("scroll");var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))}pencilInit(".js-sub-pencil",!1);

Projects that need $1-million to $2-million often have trouble raising money, and crowdfunding could help fill the gap.

iStockphoto

The comments are in, and the majority are in favour of crowdfunding.

Earlier this year the Ontario Securities Commission put out a request for public comment on the merits of allowing companies to raise equity through crowdfunding. One hundred letters were ultimately sent in and law firm Osler, Hoskin & Harcourt LLP has very handily combed through them. The verdict: Most people support the proposal.

However, "a minority of stakeholders" expressed the view that "investor protection concerns could not be adequately dealt with by regulation." In other words, no amount of oversight could really protect people from getting ripped off.

Story continues below advertisement

Here's a summary of the benefits and drawbacks conveyed:

Benefits:

- Projects that need $1-million to $2-million often have trouble raising money, and crowdfunding could help fill the gap.

- At the moment, a lot of small startups are seeded by investors who are introduced to companies through informal networks of contacts. Crowdfunding would remove the secrecy and offers a much more efficient model.

- Companies looking to raise money wouldn't have carte blanche to do whatever they like: There would be limits on things like how much each person can invest in a single company, as well as in total through crowdfunding, as well as extensive corporate disclosure when trying to raise money.

Fears:

- Investors will be ripped off because it will be impossible to monitor what each fundraiser does with its money.

Story continues below advertisement

- Equity crowdfunding could complicate the governance structure as the company grows because the fundraising process can result in thousands of shareholders, all of whom have fractional stakes.

And of course, there had to be at least one odd comment:

- Someone argued that social media makes it impossible to get ripped off in a scam because "issuers seeking capital through crowdfunding would not be faceless; instead, because of their interaction with social media, they would be well-known actors."

Well, the people who rip investors off in more conventional models aren't faceless either. And social media can't help you if your money's already in a scam.

Though the comments favour crowdfunding, by no means does the OSC have to approve it. In fact, the Commission treats crowdfunding as a "concept idea" for discussion purposes, so it doesn't have to rule for or against. For now, it simply wants to hear public opinion.

(Tim Kiladze is a Globe and Mail Reporter.)

Story continues below advertisement

Return to Streetwise home page.

Report an error Editorial code of conduct
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed.

Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies