Getting to know the Ontario Securities Commission

On November 19, 2020, MaRS hosted an information session featuring speakers from the Ontario Securities Commission (OSC). Petia Tchouk of MaRS Discovery District prepared this summary from the event, highlighting the key insights shared.

The Ontario Securities Commission (OSC) is responsible for regulating Ontario’s capital markets and protecting investors.

The Office of Economic Growth and Innovation (The Innovation Office) is a dedicated team at the OSC focused on initiatives that support economic growth and innovation in Ontario’s capital markets. The Innovation Office contributes to processes that support innovation and drive efficiency at the OSC.

This webinar recording focuses on two key areas at the Innovation Office:

1. Supporting businesses that have innovative models, while protecting investors and promoting confidence in our capital markets
2. Providing innovative startups with guidance around raising capital and navigating the regulatory environment

Accessing the OSC as a startup: OSC LaunchPad

The OSC’s LaunchPad program works directly with innovative firms, helping them navigate securities laws.

To request support from LaunchPad, visit the website, review the eligibility criteria and submit an online Request for Support form. You’ll be asked to provide information about your business and target customers, give details about your innovative product and describe what kind of guidance or support you hope to receive from the OSC LaunchPad team.

Compliance considerations for businesses regulated by the OSC

Which compliance considerations apply to your company will depend on your business model. They might include:

• Requirements that firm principals or other staff be individually approved or hold certifications, especially if you’re providing financial advice to consumers
• An annual fee (which may be scaled according to the size of your firm and type of business) for participating in Ontario’s capital markets
• Requirements to maintain financial statements that are subject to an annual audit; you may also need to provide unaudited quarterly financial statements
• Business insurance and minimum capital requirements
• Creating and maintaining an effective compliance oversight program that includes:
  • Standards around collecting information on clients and providing disclosures to clients so they understand the products or services they are receiving
  • Maintaining records and identifying, monitoring and addressing areas such as conflicts of interest, insider reporting, marketing practices and updates on the business if there are material changes
  • Creating and maintaining updated policies and processes, including how you oversee third-party service providers
  • Requirements around software systems and platforms you use
• Periodically reporting to the OSC and being subject to periodic compliance reviews

The OSC provides information for different industries, including information sessions and guidance documents to help you dive deeper into many of these topics. You’re not alone in figuring out how these rules apply to you!

Considerations when you’re raising capital

Startups have access to a variety of capital sources, including grants, funding from friends and family, bank loans and venture capital.

If you are raising capital, familiarize yourself with Ontario securities law. Generally speaking, companies selling securities (including equity) to the public in Ontario are required to prepare a prospectus and file it with the OSC (which will issue a receipt). A prospectus is a comprehensive disclosure document that sets out detailed information about the issuer and its financial position, and describes the securities being issued and the risks associated with purchasing them. After raising capital through a prospectus, a company becomes public and must also comply with continuous disclosure requirements.

The OSC recognizes that a prospectus offering can be costly and that early-stage companies need flexibility to raise capital efficiently. There are exemptions from the prospectus requirement that may be used by early-stage businesses to issue securities and raise capital.

Additional regulatory considerations for entrepreneurs

The OSC is just one of several regulatory bodies that may be relevant for your company. Examples may include:

• If you do banking or deposit taking: Office of the Superintendent of Financial Institutions
• If you work with securities, derivatives or commodity futures: the OSC, as well as the Investment Industry Regulatory Organization of Canada and the Mutual Fund Dealers Association
• If you offer insurance, pensions or mortgages: Financial Services Regulatory Authority of Ontario
• If you handle personal information: Office of the Privacy Commissioner of Canada
• If you handle money, you’ll need to comply with anti-money-laundering and anti-terrorist-financing rules: Financial Transactions and Reports Analysis Centre of Canada

The information set out here is current as of March 4, 2021. Please check www.osc.ca for the most up-to-date information about how securities regulation may impact your business.