Securities regulation 101

The OSC regulates and sets rules for Ontario’s capital markets. As an office of the OSC, the Office of Economic Growth and Innovation (Innovation Office) is committed to helping businesses understand and comply with Ontario securities law. We also seek to modernize regulation and reduce burden, eliminating barriers to innovation and building a stronger ecosystem to fuel Ontario’s long-term economic growth.

Securities laws aim to protect capital market participants and promote efficiency in the markets. These laws typically apply to any issuer of securities and any company in the business of trading or advising in securities—even businesses using new technologies or business models.

By understanding securities laws early, innovative businesses can avoid costly delays and oversights. Businesses seeking to innovate in the areas of RegTech and SupTech will also wish to understand securities laws to innovate new solutions for regulated firms and regulators, respectively.

We have provided the following guidance in several areas to help early-stage companies understand the requirements that may apply to them. This guidance is not intended as a substitute for legal advice. For additional help navigating securities laws in Ontario, check out the LaunchPad support program or educational resources.

Securities laws apply to any issuer of securities and any person or company in the business of trading or advising in securities. You may need to comply if your business involves:

• online platforms (including websites and apps) that connect investors with companies seeking to raise capital
• preparing offering documents, marketing materials, or other similar documents for companies looking to raise capital
• initial token offerings (ITOs); initial coin offerings (ICOs); crypto asset trading platforms, exchanges, or marketplaces; or crypto asset funds and fund management
• investor networks and organizations, and the platforms that support them
• lending platforms that allow investors to fund loans or portions of loans
• technology or data-driven investment activities or advice, including online advice and AI

If you are an innovative business and you’re not sure after reviewing this page whether securities laws apply to you, connect with us.

Prospectus

Every person or company that distributes previously unissued securities in Ontario must file and obtain a receipt for a prospectus with the OSC. A prospectus protects investors by providing them with a comprehensive disclosure document with enough information to make an informed investment decision. There are also certain prospectus exemptions that allow companies to raise capital without preparing a prospectus.

Registration

Every person, company, or online portal that is in the business of selling or advising in securities must be registered (or licensed). This requirement is meant to ensure that those who are in the business of selling securities have the required proficiency, integrity, and suitability to advise their clients.

Registration Requirements

Firms must register with the OSC if they conduct any of the following activities in Ontario:

• are in the business of trading in, or advising anyone with respect to investing in securities (also referred to as the “business trigger” for registration)
• act as an underwriter or an investment fund manager
• conduct trading activities involving commodity futures contracts or commodity futures options

Individuals must register if they:

• trade, advise, or underwrite on behalf of a registered dealer or adviser, or
• act as the ultimate designated person or chief compliance officer of a registered firm

To find related information about dealer, adviser, and investment fund manager registration, see:

• Getting registered in Ontario
• How to register a firm
• How to register an individual
• Ongoing requirements
• Topical guide for registrants

The OSC recognizes 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.

The prospectus exemptions available to companies are primarily set out in the following instruments:

• National Instrument 45-106 Prospectus Exemptions (NI 45-106)
• OSC Rule 45-501 Ontario Prospectus and Registration Exemptions
• Multilateral Instrument 45-108 Crowdfunding

The prospectus exemptions that are used most frequently by start-ups to raise capital include:

• private issuer (section 2.4 of NI 45-106)
• friends, family, and business associates (section 2.6.1 of NI 45-106)
• accredited investor (section 2.3 of NI 45-106)
• Offering memorandum (section 2.9 of NI 45-106)

The following resources can help you compare the different capital raising exemptions that are available in Ontario:

• Summary of Key Capital Raising Prospectus Exemptions in Ontario
• Raising Capital: A primer for small and medium sized enterprises