This copy is for your personal non-commercial use only. The Ontario Securities Commission wants to let you invest in startup firms over the Internet. But its embrace of crowdfunding has risks. In the s, many Canadians were urged to put their retirement savings into labour-sponsored venture capital funds.

And the RRSP tax deduction reduced your cost even further.

The only thing wrong with this scenario was that labour-sponsored funds had mediocre results. Only a handful made any money at all, even over the eight-year holding period required to avoid repaying the tax credits. And many funds suspended redemptions after the stock market crash, leaving investors on the hook for an even longer period.

Labour-sponsored funds flamed out once the provincial tax credits vanished. But a new venture capital idea is making the rounds — one with the potential to part people from their savings in an equally devastating way. But with equity crowdfunding, you get securities. You become an investor in a startup company. These firms are still searching for a market niche and a pathway to profit.

Since their shares are not traded on stock exchanges, they can be hard to sell in a crisis. The Ontario Securities Commission wants to make it easier to raise capital among small to medium sized enterprises. It plans to release new rules in the first quarter of , with a day comment period before taking effect.

They want regulators to get out of the way. You have a cooling off period of two business days to withdraw from your investment decision. You have to go through a registered investment portal to invest, instead of dealing directly with the issuer.

You must sign a form, acknowledging that you understand you may lose your entire investment and you can bear that loss. We want people to know that. This raised concerns about vulnerability to losses and fraud.

Can I avoid any risks that are present in the stock market?

Marian Passmore, policy director at FAIR Canada, listed other ways to protect investors in her speech at the same event:. Give investors a statutory right to sue for misrepresentation against the issuer and the registered investment portal.

This includes the right to start a class action to seek recovery for losses. Require issuers to use any capital they raise to expand their business or create jobs within Canada. Require issuers to supply audited financial statements and tell investors if they plan to use the money they raise in a different way than disclosed in the information statement.

FAIR is a five-year-old charitable organization that advocates for investors before securities regulators. Reducing investor protection could lead to the opposite of what is intended. In Canada, lotteries are regulated. Schemes to raise capital for startups from unsophisticated investors require the same level of oversight.

More articles by Ellen Roseman. Ellen Roseman writes about personal finance and consumer issues.

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You can reach her at eroseman thestar. The Toronto Star and thestar.

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Search the print archives. By Ellen Roseman On Your Side. Marian Passmore, policy director at FAIR Canada, listed other ways to protect investors in her speech at the same event: More articles by Ellen Roseman Ellen Roseman writes about personal finance and consumer issues.

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