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Financial Technology & Innovation

Securities Law Fundamentals

In Canada, all trading of securities is subject to legal obligations. There are two basic requirements underlying our securities laws:

  1. Prospectus Requirement: Every person who distributes previously unissued securities (such as bonds or shares) must file and obtain a receipt for a prospectus with the BC Securities Commission. A prospectus is a comprehensive document that discloses all material information about the issuer and the securities being sold.
  2. Registration Requirement: Every person who is in the business of trading (selling) securities, or in the business of advising another person on the purchase or sale of securities, must be registered with the BCSC. If a person is registered, then they must comply with certain obligations. For example, registered firms are subject to requirements relating to handling conflicts of interest and assessing the suitability of investments for their clients.

These requirements are subject to certain exemptions.

Generally, the prospectus requirement relates to capital-raising activities by businesses, while the registration requirement relates to conduct that creates a business of trading or advising in securities. A company’s activities may trigger one, both, or neither of these requirements.

For an example of how the prospectus and registration requirements may apply to a business model, please see our guides prepared for start-up crowdfunding issuers and portals. Businesses raising capital using a start-up crowdfunding offering trigger the prospectus requirement, but may be able to rely on the prospectus exemption related to start-up crowdfunding. Businesses that operate portals that facilitate start-up crowdfunding offerings trigger the registration requirement, but may be able to rely on the registration exemption related to start-up crowdfunding.

The start-up crowdfunding example is specific only to the business models described in the guides. In considering whether a given business model triggers securities law requirements, you should consider seeking legal advice.