The OSC today released a staff notice
expressing concern that issuers and dealers are relying on the
accredited investor exemption to sell exempt securities to
individual investors who do not meet the applicable requirements of
the exemption. According to the OSC, many dealers are failing to
collect adequate know-your-client (KYC) information to reasonably
determine whether the investor is an accredited investor, and
today's notice is intended to set out the OSC's
expectations for issuers and dealers selling securities to
The notice focuses on the $1,000,000 financial asset
and $5,000,000 net asset tests that apply to individual
investors under the definition of "accredited investor"
in National Instrument 45-106Prospectus and Registration Exemptions. Staff
have expressed concern that the two concepts are being confused.
The higher threshold test based on "net assets" could
include an investor's personal residence or other real estate
(minus liabilities) whereas the lower test based on "financial
assets" does not. According to staff, some dealers are not
making it clear to clients that a personal residence or other real
estate cannot be included for the purposes of determining financial
The notice also provides a non-exhaustive list of steps that
dealers should take when selling exempt securities, including:
reading and understanding the definition of accredited
developing an accurate form for collecting KYC
explaining the accredited investor definition to clients and
ensuring that the KYC forms are properly completed;
not selling an exempt security unless there is sufficient
information to determine whether the client qualifies;
ensuring the exempt security is suitable for the client;
reviewing the KYC form;
retaining applicable documentation;
establishing appropriate policies and procedures; and
reporting the sale of exempt securities.
Notably, with respect to the issue of sufficient information,
the notice states that it is not sufficient for issuers and their
dealers to simply rely on a client initialling or checking off a
box on an accredited investor certificate and that the information
contained in the client's completed KYC form or other
documentation must also demonstrate that the investor meets the
test. Verbal representations, according to OSC staff, are also not
sufficient to support that an investor meets the definition.
The Law Society of British Columbia’s Cloud Computing Working Group issued its Final Report on Cloud Computing on January 27, 2012, amending an earlier consultation report approved by the "Benchers" on July 15, 2011.
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