In this latest instalment of our prospectus-exempt securities series, we look at the accredited investor exemption in Ontario.

The accredited investor exemption is widely used in Canada and the United States.  In fact, about 92% of the private capital-raising in Ontario relied on the accredited investor exemption.  It is based on the idea that some investors are sufficiently sophisticated that they do not need to be protected by prospectus and registration requirements. But, of course, what does ‘sophistication’ mean? It doesn’t mean anything, really. So, the Ontario Securities Commission uses money and wealth as a proxy for evaluating what an investor actually knows about investments.

There are many different categories of accredited investors, and this post will not review them all here. However, the most commonly used are:

If you are an accredited investor, then when you subscribe to a particular investment, you will be asked to sign a risk-acknowledgement form, including making the representation and warranty that you are, indeed, an accredited investor.  And, filings must be made with the Ontario Securities Commission.

In my practice advising small businesses, start-ups, and investors, this accredited investor exemption issue comes up often. Contact me if you wish to discuss anything in this article or business law in general.

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