At the Calgary Community Capital Network we have discussed the regulatory hurdles to forming capital pools for investing in local businesses. In Canada there is not yet a federal securities regulator but each of the provinces and territories work together informally through the Canadian Securities Administrators to coordinate much of the regulation, so it is essentially uniform.

The basic framework (in an overly simplified description) is that a very expensive prospectus needs to be filed in order to raise capital unless there is a specific exemption available from the prospectus requirement. There are about 26 specific exemptions from the prospectus rules, but in practice only two or three are regularly used. While these exemptions are intended to ease the burden of capital raising, in fact the exemptions limit the people from whom capital can be sought without a prospectus to those who make $200,000 a year or those who can invest $150,000 in a single investment. As well, compliance with all of the terms of these exemptions can still have a significant cost.

These exemption limits are now under review – but it is clear that the securities regulators intend to either abolish the exemptions or raise the limits – thus making it even harder for small businesses or community capital groups to raise money. The regulators follow a public consultation process, which affords the opportunity for people interested in capital raising – including community capital – to make comments before the end of February, 2012.

The CSA staff have proposed a number of biased questions for consideration but there is nothing which prevents interested citizens from taking the opportunity to provide intelligent and thoughtful alternatives to the existing regulations, now that the subject has been opened. To review the regulatory review process and determine the best way to participate, join the Calgary Community Capital Network (it's free) and view the discussion board.