On December 7, 2022, the Ontario Securities Commission (OSC) published OSC Staff Notice 45-718 – Ontario’s Exempt Market, a report on capital raised through prospectus exemptions in the province between 2019 and 2021 (the Report). The scope of the Report is limited to non-investment fund issuers (e.g., corporate issuers) and focuses on highlighting key annual trends in exempt market financing activity in Ontario for both investors and issuers. The Report highlights that despite volatility and disruptions in the markets caused by the COVID-19 pandemic, capital raising activity in Ontario’s exempt market has continued to grow since 2019. In fact, in 2021, the use of prospectus exemptions to raise capital almost doubled its pre-pandemic value, hitting a record high of $175 billion.

Key findings in the Report include the following:

  • Ontario’s exempt market continues to be primarily composed of institutional investors, accounting for approximately 98% of the capital raised.
  • A majority of the capital raised through the exempt market was through institutional investment in foreign and U.S.-based issuers, with much of it being in debt-related offerings.
  • In 2021, there were more foreign-based issuers that raised capital from Ontario investors than Canadian issuers.
  • Individual investors predominately invested in Ontario and other Canadian issuers, with the majority of investments being made in equity securities.
  • Real estate and mortgage-related investments continue to attract an increasing share of individual investor capital, growing from approximately 37% in 2019 to 43% in 2021.
  • The most used prospectus exemption continues to be the Accredited Investor Exemption for both individual and institutional investors. However, there has also been an increase in the use of the Offering Memorandum Exemption (OM Exemption) and the Family, Friends and Business Associates Exemption (FFBA Exemption). The OM Exemption continues to be predominately used by real estate and mortgage issuers, while the FFBA Exemption was most used by non-financial issuers, especially mining issuers.

It will be interesting to see if the OM Exemption continues to be as popular following the amendments impacting issuers engaged in real estate activities and collective investment vehicles, which we describe further in the article above.

If you have any questions regarding accessing the exempt market to raise capital or the specifics of any prospectus exemption, please contact us. For more information, please see BLG’s summary on the report notes in “BLG’s Resource Corner” below.

January 31, 2023