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Canada Hurled Into SME Crowdfunding Controversy

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The CEO of the Investment Industry Association of Canada is not exactly on board with crowdfunding. Reports in Financial Post published late last week said Ian Russell has spoken out against crowdfunding, arguing that the nation’s stock exchange, TSX Venture Exchange, targeted towards early-stage companies, is “a far more effective vehicle for raising capital than crowdfunding and provides far better protection for investors.”

[bctt tweet=”Canada’s Ian Russell has spoken out against crowdfunding.”]

Russell and the Investment Industry Association of Canada are now calling on regulators to nix equity crowdfunding and instead promote the TSX Venture Exchange in an effort to help small businesses raise capital.

The remarks are already causing controversy as the National Crowdfunding Association of Canada (NCFA) issued its response to Russell’s remarks.

“Dispensing with the ‘crowdfunding’ initiative as suggested by Mr. Russell would be a huge mistake and contrary to what is happening around the world today,” the NCFA said in a statement.

The group added that recent Goldman Sachs analysis found that the global equity crowdfunding industry is booming, estimated to hit a $2.6 billion valuation for 2015.

According to reports, the TSX Venture Exchange has seen weak performance as of late, and crowdfunding is slated to enter the Canadian market to help startups raise funds. Russell is calling for government tax incentives for startups to list and trade on the exchange.

One regulator told Financial Post, without giving his name, that crowdfunding will not interfere with listings on the exchange because crowdfunding is for early, seed-stage startups, while the TSX exchange is for companies a bit more mature.

The executive director of the Foundation for the Advancement of Investor Rights, Neil Gross, told reporters, however, that the government would have to do far more than crowdfunding to help prop up the struggling TSX Venture Exchange.

“You’d need to rethink the wisdom of many other recent decisions that have opened up pathways to the exempt market,” Gross explained.

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