At the end of July, the Alberta Securities Commission (ASC) and the Financial and Consumer Affairs Authority of Saskatchewan (FCAA) amended the self-certified investor prospectus exemption that is available in Alberta and Saskatchewan under ASC Blanket Order 45-538 Self-Certified Investor Prospectus Exemption and FCAA General Order 45-538 Self-Certified Investor Prospectus Exemption (collectively, the Orders).
The exemption allows purchasers in the two provinces to invest alongside persons who qualify as accredited investors on a number of conditions, the primary condition being a self-certification that they meet alternative criteria with respect to their financial and investment knowledge. For example, the qualification criteria includes holding a CFA or Chartered Financial Analyst Charter from CFA Institute or any predecessor or successor organization or holding a CPA or Chartered Professional Accountant designation from CPA Canada (there are many additional permitted categories of educational/financial experience that will allow someone to self-certify for the purposes of the exemption).
The amendments to the exemption are meant to further facilitate its use in Alberta and Saskatchewan to allow the resale of a security on the basis of the exemption – i.e. not only an issuer but a selling security holder can utilize the exemption to distribute a security. The amendments also allow for the distribution of securities to a special purpose vehicle (SPV) without the SPV having to meet the investment limits that individual purchasers are subject to (i.e. not more than $10,000 per issuer per calendar year and not more than $30,000 across all issuers per calendar year). The new carve out for SPVs require that (i) all of the owners of interests, direct, indirect or beneficial, except the voting securities required by law to be owned by the directors, are accredited investors and self-certified investors; (ii) the SPV distributes its securities to self-certified investors in compliance with the exemption; and (iii) self-certified investors have not contributed more than 25% in total of the funds invested in the SPV.
The other conditions of the exemption all still apply, including that the head office of the issuer of the security must be located in either Alberta or Saskatchewan, the purchaser must be provided access to substantially the same information about the securities as would be provided to an accredited investor, and the seller must obtain from the purchaser a statutory declaration in prescribed form acknowledging the criteria on which the purchaser is relying on the exemption. If the distribution is made by the issuer of the security, the issuer must file a report of exempt distribution and pay applicable fees on or before the 10th day after the closing of the distribution.
August 17, 2022