On September 25, 2022, the Ontario Securities Commission (OSC) announced that it had adopted an exemption from the prospectus requirements on a pilot basis. The exemption in effect broadens the accredited investor exemption to persons who have relevant proficiency that indicates a high degree of understanding of investing and the markets but who may not meet the financial thresholds or other criteria to qualify as an accredited investor. In the interim prior to any formal expansion of the existing exemption, the OSC released Ontario Instrument 45-507 Self-Certified Investor Prospectus Exemption (Interim Class Order), where a prospectus exemption is being made available for distributions of securities in Ontario of non-investment fund issuers to “Self-Certified Investors” (as defined in the order) or to their permitted designates (such as their RRSP), subject to numerous conditions. The issuer must have its head office in Ontario, and the aggregate acquisition cost of all securities purchased by a Self-Certified Investor (and permitted designate) under the exemption in a calendar year may not exceed $30,000. A person can qualify as a Self-Certified Investor in numerous ways, but includes a person who:
- Holds a Chartered Financial Analyst Charter from CFA Institute;
- Holds a Chartered Investment Manager designation from the Canadian Securities Institute;
- Holds a Chartered Professional Accountant designation from CPA Canada;
- Is a lawyer admitted to practice law in a jurisdiction of Canada where at least 33% of their practice involved providing advice respecting financings involving public or private distributions of securities or M&A;
- Has passed certain courses including the Exempt Market Products Exam or the Canadian Investment Funds Course Exam administered by the IFSE Institute;
- Holds a Certified Financial Planner designation from FP Canada; or
- Has management, policy-making, engineering, product or other relevant operational experience at a business that operates in the same industry or sector as the issuer and who, as a result of this experience, is able to adequately assess and understand the risk of investment in the issuer.
Issuers who rely on this exemption will need to file a private placement report and a confirmation of qualifying criteria provided by the investor within 10 days of a distribution. The investor must also complete and sign a risk acknowledgment form that describes twelve general risks of the private placement, including with respect to resale restrictions and potential lack of available information and financial statements.
The order is in effect until the earlier of (i) April 25, 2024 (unless extended); and (ii) the effective date of any amendment to National Instrument 45-106 Prospectus Exemptions that addresses substantially the same subject matter of the order.
October 31, 2022