OSC Introduces Self-Certified Investor Prospectus Exemption

Overview

The Ontario Securities Commission (OSC) has adopted a new prospectus exemption (the “Self-Certified Investor Prospectus Exemption”) applicable to prospective investors that meet certain proficiency requirements but may not meet the financial thresholds required to invest through the “accredited investor exemption” (referred to as “Self-Certified Investors”). The Self-Certified Investor Prospectus Exemption is being made available pursuant to Ontario Instrument 45-507 – Self-Certified Investor Prospectus Exemption (Interim Class Order) (the “Interim Order”). The exemption is similar to exemptions adopted in Alberta and Saskatchewan in March 2021.

The Interim Order came into effect on October 25, 2022 and expires on April 25, 2024, subject to extension or permanent adoption.

Self-Certified Investor Prospectus Exemption

Under the Self-Certified Prospectus Exemption, non-investment fund issuers with a head office in Ontario may conduct sales of securities to Self-Certified Investors. An issuer relying on the exemption does not have to be a reporting issuer under Canadian securities laws and the exemption will be available to private issuers raising capital. Self-Certified Investors are generally individuals who:

• hold certain designations or credentials (such as Chartered Financial Analyst);
• hold certain degrees (such as a Masters of Business Administration with a focus on finance or undergraduate degree in finance);
• have passed certain courses or exams (such as the Canadian Securities Course or Exempt Market Products Exam); or
• have 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, are able to adequately assess and understand the risk of investment in the issuer.
  

The maximum amount that a Self-Certified Investor (and any permitted designate) is permitted to invest is $30,000 per calendar year.

Issuers relying on the Self-Certified Investor Prospectus Exemption are required to file a completed Form 45-106F1 Report of Exempt Distribution (an existing requirement for other prospectus exemptions) and a “Confirmation of Qualifying Criteria” completed by the Self-Certified Investor, confirming they meet one or more of the criteria identified in the Interim Order (similar to the confirmation already required for accredited investors). Additionally, the Self-Certified Investor must provide a detailed risk acknowledgement statement.

The Self-Certified Prospectus Exemption should be a positive addition to the Ontario exempt distribution market, enhancing the ability of issuers to raise capital while at the same time providing qualified investors with increased access to investment opportunities.

To discuss the Self-Certified Investor Prospectus Exemption or for any further information, please contact any member of our Capital Markets Group.