On October 25, 2022, the Ontario Securities Commission (OSC) announced an 18-month pilot program that provides Ontario investors with qualifying education or work experience access to increased investment opportunities under a prospectus exemption¹ (Self-Certified Investor Exemption or Exemption), similar to the commonly used Accredited Investor exemption (Accredited Investor Exemption). 

The Self-Certified Investor Exemption came into effect on October 25, 2022. The Exemption will remain in effect until April 25, 2024 (unless extended by the OSC) or until the date the Exemption is subsumed by an expansion to the Accredited Investor Exemption.

To make use of the Self-Certified Investor Exemption, investors will be:

• Required to certify that they have met at least one of the qualifying criteria (which include industry-specific work experience, various financial and accounting designations and credentials, and business and finance university degrees);
• Required to review and complete a risk acknowledgment form confirming they understand the risks of investing in the issuer; and
• Subject to a CA$30,000 annual investment limit per calendar year and may choose to allocate that amount to one or more issuers. 

Similar to the Accredited Investor Exemption, securities issued under the Self-Certified Investor Exemption will be subject to the same restrictions on transfer (i.e., four-month and a day hold period), and issuers must report the use of the Exemption by filing a report of exempt distribution on or before the 10th day after the distribution date. The OSC will use this data to monitor the use of the Self-Certified Investor Exemption and inform future policymaking, including whether to implement the Exemption on a permanent basis, potentially by expanding the definition of “Accredited Investor.”

The Self-Certified Investor Exemption was created in response to the Government of Ontario Capital Markets Modernization Taskforce’s recommendation, published in its final report on January 22, 2021, to expand the definition of “Accredited Investor” to include “individuals who have completed and passed relevant proficiency requirements … indicating a high degree of understanding of investments and markets.”²

According to the OSC, in Ontario, the overwhelming majority of capital raised from individuals pursuant to prospectus-exempt distributions is through the Accredited Investor Exemption. However, as identified by the OSC, certain individuals possess the necessary business knowledge, through their education or relevant industry experience, to make an informed investment decision (including understanding the associated risks and rewards of investing without a prospectus), but may not meet the financial thresholds or other criteria required to qualify as an Accredited Investor. In response, the Self-Certified Investor Exemption aims to allow qualifying individuals to invest in Ontario headquartered issuers (other than investment funds) without triggering the prospectus requirement. 

Further details of the Self-Certified Investor Exemption are set out in Ontario Instrument 45-507 Self-Certified Investor Prospectus Exemption (Interim Class Order).

Dentons insight

Following the lead of the Alberta and Saskatchewan securities regulators, the OSC is finding new opportunities to assist issuers in raising capital by expanding the pool of potential persons eligible to participate in prospectus-exempt offerings while also providing an avenue for well-informed individuals to participate in offerings that may otherwise be inaccessible. The Self-Certified Investor Exemption is another example, much like the well-known seasoned issuer pilot program³ and the listed issuer financing exemption⁴, of Canadian securities regulators finding additional investment and capital raising opportunities for participants in the Canadian capital markets. The Exemption is a potential stepping stone to expand the definition of an Accredited Investor, but time will dictate the success of this 18-month pilot program.

Should you have any questions about the Self-Certified Investor Exemption, please do not hesitate to contact co-authors Ora Wexler, Ben Iscoe, Ellery O’Hara, Diana Nakka, or any member of Dentons Canada’s Securities and Corporate Finance group.

1. On March 31, 2021, the securities regulators in Alberta and Saskatchewan implemented substantially similar prospectus exemptions.↩
2. See recommendation number 23 of the Government of Ontario Capital Markets Modernization Taskforce’s final report at: https://files.ontario.ca/books/mof-capital-markets-modernization-taskforce-final-report-en-2021-01-22-v2.pdf.↩
3. For additional information on the well-known seasoned issuer pilot program, please see the Dentons Insight here: https://www.dentons.com/en/insights/articles/2021/december/16/well-known-seasoned-issuers-are-coming-north-for-the-new-year.↩ 
4. For additional information on the listed issuer financing exemption, please see the Dentons Insight here: https://www.dentons.com/en/insights/articles/2022/september/23/canadian-securities-administrators-announces-new-listed-issuer-financing-prospectus-exemption.↩