How long can an offering stay open under the Ontario Securities Commission’s crowdfunding proposal? Firstly, the issuer’s documentation must indicate how long the offer is open. In any case, it may not exceed 90 days, which is the current rule for a prospectus. If the offering does not meet its target financing, the offering must be withdrawn. The thinking behind this provision is that information can become stale and put the potential investor at a disadvantage because s/he does not have “full disclosure” of the proposed investment. There would be no restriction on re-issuing an offering immediately after the previous offering was withdrawn, provided it meets all of the OSC requirements at the time of re-issue.
The National Crowdfunding Association of Canada (NCAC) notes that markets are not predictable and implies that while 90 days might be adequate in some circumstance, it may not be adequate in another. In order to adhere to the “full disclosure” principle, the NCAC proposes that some sort of extension of the original 90 days ought to be devised, provided any information that has changed is updated. Furthermore, the NCAC proposes that issuers of previous offerings, whether successful or otherwise, should provide this information on subsequent issues. The NCAC notes this requirement would be similar to the present requirement for prospectus disclosure.
If the purpose of the 90 day rule is “freshness” of information, certainly this could be dealt with by supplemental information or a declaration that all information in the “old” offering remains relevant. This would make it less onerous on the issuer in terms of time and cost and protect the investor. Seems a no –brainer. Let’s see how it shakes out with the OSC.