What is a "portal", anyway?

What is a “portal” anyway?

Under the OSC proposed new crowdfunding prospectus exemption, a key investor protection element is the requirement that issuers only make an offering through a “registered” “portal”.

According to the OSC, registration is necessary to address, among other things, potential integrity, proficiency and solvency concerns that may apply to funding portals and the persons operating them, as well as potential concerns relating to conflicts of interest and self-dealing. The registration requirement is also intended to serve as a safeguard against funding portals being used to facilitate fraudulent offerings of securities through the internet.

A “portal” then, is a “dealer” and a “dealer” is a person or company, who, without an exemption, “engages in the business of trading in securities”. But the proposed crowdfunding exemption goes further and requires that the “portal” shall be a “restricted dealer”. Restricted dealers are those dealers whose activities as a dealer are limited in some fashion. In this case, a portal will only be able to act as an intermediary with respect to crowdfunding exemption offering. No other exemptions or secondary transactions will be permitted.

So, bottom line at this point, if you intend to issue securities using the crowdfunding exemption, once the exemption is law, you will need to find a “registered portal”. In Ontario, visit the OSC website and find the page for OSC Registrant Search.

Posted on October 7, 2014 and filed under Crowdfunding.