Lawyers for disqualified pot shop applicants say process was unfair

TORONTO — A legal battle over Ontario’s licensing system for retail cannabis stores focused Wednesday on the steps taken by the province to contact a number of applicants who were later disqualified for failing to file documents by a certain date.The group of 11 applicants is challenging the rejection and disputing the fairness of the procedures involved in the lottery that has been used to grant all of Ontario’s pot shop licences.At a hearing in Toronto, the group’s lawyers argued Wednesday that under the rules set out by the provincial agency overseeing the process, those who win the chance to apply must submit certain documents within five business days once they are notified of their selection.They said an email alerting their clients of the lottery’s outcome and the application timeline did not go through, and as such, the deadline should have been recalculated based on when the message was actually delivered.The Alcohol and Gaming Commission of Ontario “just determined that the attempt-to-notify was sufficient” to trigger the countdown, which is unfair and unreasonable, attorney Michael Lacy told a three-judge panel.As a result, he argued, the commission was not entitled to disqualify the 11 applicants or to select a new slate of applicants to replace them. The group should be allowed to complete the application process and the others returned to the wait list, he said.Lawyers representing the commission, however, said the eliminated applicants were to blame for the email bouncing back since they provided the address and chose that method of communication.What’s more, Judie Im argued, the commission then followed up with telephone calls, posted the list of lottery winners online and eventually sent letters by courier. Many of the calls failed to reach the applicants and three never picked up the packages, she said.When they did receive a letter notifying them of their selection, the applicants should have seen that it was dated Aug. 21 and laid out a deadline of Aug. 28, she added.“The fault… lies with them and not the registrar,” Im said, noting none of the applicants sought to clarify the deadline or obtain an extension.Even if the commission is found to have erred in disqualifying the group, the newly chosen applicants should not be penalized for that mistake, said lawyer Robin Linley, who represents some of them.Linley said his clients have already taken steps to meet the application criteria.The dispute largely revolves over what it means to be notified, and whether delivery or receipt of the message is required, Ontario Superior Court Justice David Corbett said.Earlier this month, Corbett paused the licensing process for the latest round of cannabis stores until the case is resolved. The panel is set to present its decision on Monday.Lawyers representing the commission had contested the stay, saying it would interfere with the integrity of the lottery system. There was also opposition from lawyers representing the applicants selected to replace those eliminated.So far, there have been two rounds of the government lottery to determine who can apply to open cannabis stores. The first involved 25 spots and the second 42.Lottery winners have five business days to turn in their application, along with a $6,000 non-refundable fee and a $50,000 letter of credit.The legal challenge may affect the government’s timeline to increase the number of legal pot shops in the province.This report by The Canadian Press was first published Sept. 25, 2019.Paola Loriggio, The Canadian Press read more

SEC blesses public crowdfunding for startups but will keep watchful eye on

WASHINGTON – A new form of crowdfunding is coming soon that will allow startups to raise money by selling stock to Main Street investors.The Securities and Exchange Commission on Friday adopted rules implementing a 2012 law that opened the door to securities crowdfunding. The vote was 3-1 at a public meeting.For years, artists, charities and entrepreneurs have used the power of the Internet to generate money for projects. Starting in mid-2016, businesses will be able to offer investors a piece of their company by legally selling stock online.For investors, it’s a chance to make a small profit and possibly get in early on the next Twitter, Instagram or Uber.But it also entails high risk, given that a majority of startups fail. About half of all small businesses shut down within the first five years. Some critics also warn that investment crowdfunding is ripe for fraud.The new SEC rules won’t prevent the types of fraud that can arise in conventional online scams, said Mercer Bullard, a law professor at the University of Mississippi who is a mutual-fund investor advocate.“You can embezzle someone’s money in the guise of making a securities offering,” Bullard said in a telephone interview.With an eye to protecting investors, the crowdfunding securities offerings can only be made through brokerage firms or new Internet funding portals that must be registered with the SEC. The portals will be expected to provide investors with materials explaining the process, investment limits and resale restrictions. To reduce fraud risks, the portals are charged with vetting the companies and the prospective investors.SEC Chair Mary Jo White said before the vote that agency staff “will begin immediately to keep a watchful eye on how this market develops.”They will assess what kinds of companies use the new crowdfunding offerings, how closely they follow the rules and whether the new practice promotes the raising of capital while also protecting investors.The SEC proposed the crowdfunding rules two years ago. Waiting at the starting gate for the final rules to take effect: legions of startups in areas such as packaged food, medical and biotechnology, restaurants and real estate.Lisa Fetterman, the founder and CEO of cooking equipment startup Nomiku, sees a potential opportunity — “because banks aren’t going to give you money,” she said. The company sells machines for sous-vide cooking, a sort of vacuum method meant to cook evenly and seal in moisture, to both home cooks and restaurants.Nomiku has raised about $1.3 million in the past few years through conventional crowdfunding on Kickstarter. Now with SEC rule change, Fetterman sees about a 50-50 chance her company will plunge into investment crowdfunding. Key factors are the quality of funding portals and the extent to which they can vet investors, she said.Under the new rules, people with annual income or net worth less than $100,000 will be allowed to invest a maximum of 5 per cent of their yearly income or net worth, or $2,000 if that is greater. Those with higher incomes can invest up to 10 per cent. An individual can’t invest a total of more than $100,000 in all crowdfunding offerings during a 12-month period.Investors generally couldn’t resell their crowdfunding securities for one year.Under current rules, only “accredited investors” who meet certain wealth thresholds can fund startups. They must either have a net worth of $1 million, excluding the value of their primary home, or have generated income of $200,000 or more in each of the last two years.For their part, companies will be allowed to raise a maximum of $1 million a year from individual investors without registering with the SEC. Companies will have to provide information to investors about their business plan and how they will use the money they raise, as well as a list of their officers, directors and those who own at least 20 per cent of the company.Raising money for startups “is like fishing in a pond. You have more pond to fish in now,” said Hitomi Kimura, a co-founder of DinersCode, which sends customers to Manhattan restaurants by offering free drinks, perks and discounts for frequent diners. Kimura also will be looking into the new crowdfunding.Indiegogo, a titan of conventional crowdfunding along with Kickstarter, may branch out and get into the securities crowdfunding game.“All of us at Indiegogo are excited that the SEC is formally expanding the way in which everyone will be able participate in the entrepreneurial ecosystem through the amazing power of crowdfunding,” CEO Slava Rubin said in a statement. “We’re now exploring how equity crowdfunding may play a role in Indiegogo’s business model.”The goal of the 2012 law was to help entrepreneurs raise money quickly when they couldn’t attract attention from venture capitalists or traditional deep-pocketed investors.At the same time, the law eased the SEC’s regulatory reach by giving the startups an exemption from filing rules. The rationale was that new businesses in a hurry to raise money would be hampered by having to submit paperwork. It was an about-face for Congress after expanding the SEC’s powers only two years earlier in response to the 2008 financial crisis. by Marcy Gordon, The Associated Press Posted Oct 30, 2015 10:08 am MDT Last Updated Oct 30, 2015 at 1:40 pm MDT AddThis Sharing ButtonsShare to TwitterTwitterShare to FacebookFacebookShare to RedditRedditShare to 電子郵件Email SEC blesses public crowdfunding for startups, but will keep ‘watchful eye’ on potential risks read more