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B.C. 'playing catch-up' as Ontario unveils new fintech-friendly initiatives

Ontario Securities Commission launching new programs to help companies navigate complex regulations
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The BC Securities Commission (BCSC) has always been “forward-thinking” when helping local financial technology (fintech) companies navigate complex regulations, according to Ali Pourdad.

But the CEO of Vancouver-based Progressa says new initiatives from the Ontario Securities Commission (OSC) could put B.C. fintechs and regulators at risk of playing catch-up with their central Canadian counterparts.

In late October, the OSC unveiled LaunchPad, a program designed to help locally based fintechs navigate securities law requirements. A week later, the regulator announced it was seeking applications on a newly established fintech advisory committee to advise OSC LaunchPad staff.

The changes come eight months after Toronto’s Lending Loop voluntarily suspended operations in March after the OSC notified the peer-to-peer lending service it was not in compliance with provincial regulations.

Lending Loop allows retail investors to lend money to small businesses that often pay lower interest rates than those offered by traditional institutions.

After consulting with the OSC and completing a registration process to become an exempt market dealer, Lending Loop re-launched in October.

Pourdad said a B.C.-based program similar to LaunchPad is “absolutely” necessary for the health of the local fintech sector.

“I do see [the BCSC] stepping forward, although I think it’s necessary for them to do that sooner rather than later; otherwise they could see themselves playing catch-up in a situation,” said Pourdad, whose fintech company specializes in personal loans.

Alixe Cormick, a corporate securities lawyer and founder of Vancouver-based Venture Law Corp., said many in the Canadian fintech sector wanted LaunchPad to be similar to the “regulatory sandbox” the U.K.’s Financial Conduct Authority (FCA) unveiled last year.

The sandbox allows British fintech companies accepted into the program to test products and services in what the FCA describes as a “safe space” that would exempt them from many regulations that normally apply.

“We had all hoped [LaunchPad] was going to be that but it’s not,” Cormick said, adding LaunchPad functions more like a request for service that can also provide exemptions.

“A fintech advisory board [in B.C.] probably would go a longer way than a LaunchPad.”

Mark Wang, the BCSC’s director of capital markets regulation, said one of the regulator’s mandates is to help companies navigate the province’s securities regulatory framework “and we are considering if we can do more on that front.”

“We have dealt with a number of fintech companies over the course of the last few years and we are starting to build up a fair amount of expertise in these types of business models,” he said.

“So we are positioned to assist fintech companies when they reach out to us so we can help guide them through what they need to do.”

Since 2011, 24 fintech companies have launched in B.C., bringing the total to 29, according to figures from the BC Tech Association.

Wang said the BCSC is not proposing any changes to regulations to accommodate the growth of the local industry.

Instead, he said the regulator would continue to evaluate the different business models on a case-by-case basis when granting exemptions from certain regulatory requirements.

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