On January 22, 2021, the Capital Markets Modernization Taskforce (Taskforce) released its final report (Report). The Taskforce was established by the Ontario Provincial Government to help transform the regulatory landscape for the capital markets sector, and advise the Minister of Finance on how to improve the innovation and competitiveness of the Province’s capital markets and best help build Ontario’s economy.

The Report includes 74 policy recommendations designed to amend securities laws in the following areas improving regulatory structure to enhance governance; improving competitiveness through regulatory measures; ensuring a level playing field between large and small market players; improving the proxy system, corporate governance and the process of mergers and acquisitions; fostering innovation; and modernizing enforcement and enhancing investor protection.

Because of the far reaching nature of the numerous recommendations, BAX will do a series of articles over the next few weeks on recommendations of interest to small and midcap issuers and the registrants that service them. 

Recommendation #33 –  Allow for greater access to capital for start-ups and entrepreneurs

The Taskforce’s view is that the COVID-19 pandemic has reiterated the importance of capital formation for start-ups and entrepreneurs in ensuring a sustainable economy. The Taskforce refers to angel investor “groups” or “networks” that attract quality earlier-stage issuers for investment consideration, professionalize and share due diligence, share domain knowledge and expertise in particular industries and assist in reducing the cost of capital of a transaction. The Taskforce recommends that the Ontario Securities Commission modernize its rules so that this early-stage financing of start-ups can be undertaken by angel groups to assist with capital formation including changes to the current registration requirements to enable angel groups to work with their “accredited investor” members to encourage investments in early stage issuers.

The Taskforce questions whether this should this apply to not-for-profit angel groups and whether this should be facilitated through regulatory relief (exemption), or exemptive relief or through a form of no-action letter. The Report also queries whether peer to peer (P2P) lending frameworks be leveraged to support capital raising of such early stage start-up businesses.

For a full copy of the Report:

For more information, please call Barbara Hendrickson at BAX Securities Law (647) 403-4606.

This publication is not intended to constitute legal advice. No one should act on it or refrain from acting on it without consulting with a lawyer. BAX does not warrant or guarantee the accuracy or currency or completeness of the publication. No part of this publication may be reproduced without the prior written permission of BAX Securities Law.