On March 31, 2021, securities regulators in Alberta and Saskatchewan adopted a new self-certified investor prospectus exemption, in effect for the next three years (expiring April 1, 2024), to increase capital access and investment opportunities for businesses and investors in their respective provinces.
Self-Certified Investor Prospectus Exemption
The pilot project for this new prospectus exemption will allow issuers in Alberta and Saskatchewan to distribute securities to investors who self-certify as meeting certain financial and investment knowledge criteria (Self-Certified Investor). The exemption is intended for investors who do not meet the financial thresholds or other criteria required to qualify as an "accredited investor" (as defined in National Instrument 45-106 – Prospectus Exemptions) but that meet other criteria to demonstrate a certain level of financial and investment knowledge and are investing concurrently with an accredited investor. While one of the stated goals of this exemption is to facilitate the growth and financing of early stage businesses in emerging industries, this exemption will also be of interest to other issuers in facilitating their capital raising efforts by way of private placement.
The eligibility criteria for a Self-Certified Investor to utilize the exemption in a distribution of securities by an issuer include:
- the head office of the issuer must be in Alberta or Saskatchewan;
- for investments in an non-exchange-listed issuer:
- the aggregate acquisition cost of the securities of the issuer acquired by the Self-Certified Investor in reliance on the exemption in the calendar year does not exceed $10,000; and
- the aggregate acquisition cost of all securities of all issuers acquired in the calendar year by that Self-Certified Investor in reliance on the exemption does not exceed $30,000;
- for investments in an exchange-listed issuer, the Self-Certified Investor has received advice regarding the suitability of the investment from a registered dealer or other registrant;
- there must be a concurrent distribution to an accredited investor;
- the Self-Certified Investor must be provided with the same information given to all potential investors in connection with the offering; and
- the Self-Certified Investor must invest as a principal, and sign a statutory declaration and acknowledgement that it is qualified to rely on the exemption (in accordance with the criteria described below), and has read and understood certain considerations regarding the risks of the investment.
The exemption requires that a Self-Certified Investor acknowledge that it has met certain educational and designation requirements. Holders of CFA, CIM, CBV, CPA and CIWM designations from the relevant professional organizations, as well as lawyers, business degree holders (undergraduate or MBA) and persons who have passed the Canadian Securities Course will be qualified, provided certain additional requirements are met.
It is anticipated that this exemption will be beneficial to early stage business by increasing the pool of potential investors available.