EMD-as-a-Service in Ontario: From Waverley to Startly

This article is current as of the time of publication, is for informational purposes and does not constitute professional advice. Independent legal advice should be sought prior to relying on any information herein.

In February 2025, an Ontario Securities Commission Director ruled in favour of Startly Inc.’s proposed approach to EMD-as-a-Service, declining OSC Staff’s recommended restriction on issuer-sponsored dealing representatives and instead imposing terms and conditions substantially consistent with the regulatory framework Startly had proposed.

The decision builds on the OSC’s earlier decision in Re Waverley Corporate Financial Services Ltd. and provides a contemporary reference point for issuer-sponsored distribution under the modern registrant framework.

Together, Waverley and Startly help explain how EMD-as-a-Service operates in Ontario: an issuer can maintain its own capital-raising capabilities and investor relationships, including through appropriately registered issuer personnel, while an independent exempt market dealer remains responsible for the regulated dealer functions associated with the distribution.

What is EMD-as-a-Service?

EMD-as-a-Service is a dealer model for issuers and investment managers that have their own capital-raising capabilities and investor relationships but require a registered dealer for activities subject to dealer registration requirements.

In a typical structure, the issuer continues to originate prospective investors and manage its broader investor relations activities. Eligible issuer personnel may become registered dealing representatives of an independent EMD and conduct registrable activity within the EMD’s compliance and supervisory framework.

The OSC has also referred to this structure as the “issuer-sponsored dealing representative business model.”

The model does not reduce the responsibilities of the registered dealer. The EMD remains responsible for product due diligence and KYP, applicable KYC and suitability requirements, conflicts management, dealing representative supervision, securities-related communications, books and records and its broader compliance obligations.

The central regulatory question is therefore not simply whether an individual associated with an issuer can become a dealing representative of an independent EMD. It is how the relationship is structured so that the EMD continues to independently perform its regulatory functions.

Waverley: the regulatory foundation

The OSC considered an earlier form of issuer-sponsored distribution in its 2017 decision in Re Waverley Corporate Financial Services Ltd.

Waverley operated an EMD business in which individuals associated with sponsoring issuers became registered dealing representatives of Waverley and participated in distributions of those issuers’ securities. Many had employment, financial, business or family relationships with the issuers whose securities they distributed.

Following an OSC compliance review, concerns arose regarding conflicts of interest, supervision, marketing materials, books and records and other aspects of Waverley’s “Issuer-Connected DR Model.”

A Director initially required Waverley to cease operating the model. On hearing and review, however, the Commission declined to prohibit Waverley from sourcing dealing representatives from sponsoring issuers. Instead, it imposed terms and conditions designed to address the regulatory risks associated with the structure.

Waverley therefore established an important principle. An issuer-connected dealing representative model is not inherently impermissible, but the EMD must maintain substantive control over the regulated functions performed through it.

That includes exercising independent judgment, identifying and addressing conflicts arising from issuer relationships, meaningfully supervising dealing representatives and performing the dealer’s gatekeeper role rather than simply deferring to the issuer.

From Waverley to the modern registrant framework

The regulatory framework developed materially in the years following Waverley.

The Client Focused Reforms introduced an express KYP requirement in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations and strengthened the requirements governing conflicts of interest and suitability.

These requirements are particularly relevant to issuer-sponsored distribution. Where a dealing representative is employed by, owns an interest in, receives compensation from or otherwise has an economic relationship with an issuer, the EMD must address those relationships within its compliance and supervisory framework.

Issuer-sponsored distribution has also become more visible within the exempt market. OSC Staff has expressly referred in published registrant guidance to the “issuer-sponsored Dealing Representative business model,” including arrangements in which an individual working for an issuer or its affiliate becomes registered with an independent EMD to market that issuer’s securities.

The regulatory discussion has therefore evolved from the circumstances considered in Waverley. The contemporary question is how an issuer-sponsored model should operate within the modern KYP, conflicts, suitability and supervisory framework.

Startly: a contemporary EMD-as-a-Service decision

Startly approached the OSC in 2022 regarding a proposed EMD-as-a-Service model under which eligible individuals associated with an issuer could become registered dealing representatives of Startly and conduct registrable activity within Startly’s dealer framework.

Importantly, Startly approached the OSC before implementing the model and proposed additional terms and conditions governing its operation.

This distinguishes the procedural history from Waverley. The issuer-connected model considered in Waverley was already operating when it became the subject of regulatory review. Startly instead addressed the proposed structure prospectively.

OSC Staff subsequently recommended a more restrictive approach, including a term that would have prevented Startly from sponsoring a dealing representative who received compensation from an issuer whose securities were distributed through Startly, subject to a limited exception.

Startly asked the Director to reject Staff’s recommendation and instead impose terms permitting implementation of EMD-as-a-Service.

The Director did not accept Staff’s recommendation.

Instead, the Director imposed a different set of terms and conditions substantially consistent with the regulatory framework Startly had proposed. Those terms permit issuer-sponsored dealing representatives within a framework addressing product due diligence, conflicts, disclosure, registration information, contractual arrangements with issuers and dealer supervision.

The significance of Startly is not that it created EMD-as-a-Service. Rather, it provides a contemporary example of how an issuer-sponsored dealing representative structure can operate within the modern registrant framework.

What Waverley and Startly mean for EMD-as-a-Service today

Read together, Waverley, Startly and the modern requirements of NI 31-103 point to a relatively clear regulatory architecture.

Independent KYP
The EMD must independently understand and approve securities made available through it. Issuer-prepared disclosure can inform that process but does not replace the dealer’s own product due diligence.

Conflicts management
Employment, ownership, compensation and other relationships among an issuer, a dealing representative and the EMD must be identified and appropriately addressed. The terms imposed in Startly include specific requirements relating to the disclosure of relationships and material conflicts.

Dealer supervision
An issuer-sponsored dealing representative remains subject to the EMD’s supervision when conducting registrable activity on behalf of the dealer. The EMD therefore needs sufficient information, authority and control to supervise that activity regardless of the representative’s separate relationship with the issuer.

Clear allocation of responsibilities
The Startly terms require a written distribution agreement addressing aspects of the relationship between the EMD and specified issuers, including offering and marketing materials and the allocation of compensation for registrable and non-registrable activities.

KYC and suitability
An issuer may originate an investor relationship, but that does not transfer the EMD’s applicable investor-level obligations to the issuer. The dealer remains responsible for KYC and suitability requirements applicable to trades conducted through it.

These requirements distinguish EMD-as-a-Service from the mere provision of registration infrastructure. The issuer may maintain its investor relationships and capital-raising organization, but the EMD must independently perform and supervise the dealer functions for which it is registered.

What this means for issuers

For issuers and investment managers, EMD-as-a-Service can provide a way to maintain an established capital-raising program within an independent registered dealer framework.

That independence has practical consequences.

An EMD should conduct its own issuer and product review, oversee registered individuals, review relevant offering and marketing communications, address conflicts, maintain appropriate records and satisfy applicable investor-level requirements. It may request additional information, require changes to materials or processes, determine that a proposed investment is unsuitable or decline to participate in a particular offering or transaction.

Those functions are not incidental to EMD-as-a-Service. They are part of the dealer’s regulatory role.

The model is therefore particularly relevant to established issuers and investment managers that have their own investor relationships and capital-raising capabilities but want registrable activity conducted through an independent EMD.

Startly and EMD-as-a-Service today

Startly provides EMD-as-a-Service to investment managers conducting issuer-sourced exempt market distributions.

Subject to Startly’s onboarding, registration, proficiency, training and supervisory requirements, eligible issuer personnel may become dealing representatives sponsored by Startly.

Startly’s dealer framework includes issuer and product due diligence, KYP, conflicts management, investor onboarding, KYC and suitability oversight, dealing representative supervision, compliance testing, regulatory reporting, books and records and ongoing dealer oversight.

The structure allows an investment manager to maintain its existing investor relationships and capital-raising organization while conducting registrable activity within an independent EMD framework.

From Waverley to Startly

Waverley and Startly arose in different circumstances and under different stages of Ontario’s registrant regulatory framework, but they reflect a consistent principle.

Issuer-sponsored distribution does not diminish the responsibilities of the registered dealer.

Waverley identified the conflicts and supervisory risks associated with issuer-connected dealing representatives and established that those risks could be addressed through appropriate regulatory controls rather than an outright prohibition of the structure.

The subsequent development of NI 31-103 provided a more detailed framework for KYP, conflicts and suitability. Startly provides a contemporary example of those principles being applied prospectively to an EMD-as-a-Service structure.

Together, these developments help explain how EMD-as-a-Service operates in Ontario today: not as an alternative to dealer oversight, but as a structure through which issuer-led capital raising and substantive independent dealer responsibility can coexist.

Primary sources

Re Waverley Corporate Financial Services Ltd. and Donald McDonald, Reasons and Decision, March 1, 2017.

In the Matter of Staff’s Recommendation to Impose Terms and Conditions on the Registration of Startly Inc., Director’s Decision, February 6, 2025.

National Instrument 31-103, Registration Requirements, Exemptions and Ongoing Registrant Obligations, and Companion Policy 31-103CP.

OSC Staff guidance concerning the issuer-sponsored dealing representative business model.

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