The Canadian Securities Administrators (CSA) recently published
for comment proposed amendments (the Proposed Amendments) to
National Instrument 45-106 - Prospectus and Registration
Exemptions (NI 45-106).
If adopted, the Proposed Amendments would, among other
require issuers relying on the accredited investor prospectus
exemption (the AI Exemption) to obtain a signed risk
acknowledgement form (the RA Form) from individual accredited
investors who are not "permitted clients";
restrict the minimum amount prospectus exemption (the MA
Exemption) to non-individual investors; and
harmonize the definition of accredited investor to allow fully
managed accounts to purchase investment fund securities in
The CSA believes the Proposed Amendments will enhance protection
of individual investors.
It is proposed that the following changes be made to the AI
All individual accredited investors other than "permitted
clients" would be required to complete and sign a new RA Form
that describes, in plain language, the categories of individual
accredited investor and the protections an investor is renouncing
by purchasing under the exemption. Individual permitted clients
must own financial assets in excess of $5 million.
Any director, officer or employee of the issuer and any other
person involved in meeting with or providing information to the
individual accredited investor would be required to complete and
sign the RA Form.
The proposed amendments provide additional guidance in the
companion policy on the steps issuers should take to verify
accredited investor status. These steps include explaining the
different conditions of the exemption and asking questions to
obtain factual information from purchasers about their income or
assets before discussing the investment. This proposed guidance
seems to impose additional compliance requirements on an issuer of
privately placed securities, as an issuer is currently permitted to
rely on a purchaser's factual representations regarding
accredited investor status provided the issuer has no reasonable
grounds to believe those representations are false.
An issuer would be required to identify the category of
accredited investor of each purchaser in the report of exempt
distribution the issuer files.
The definition of accredited investor would be amended to
include family trusts established by an accredited investor for his
or her family, provided the majority of trustees of the family
trust are accredited investors.
Proposed amendment to the MA Exemption
It is proposed that the MA Exemption be amended so it is only
available for distributions to non-individuals. The CSA believes
the amendment to the MA Exemption will reduce the risk of
individual investors over-concentrating their investable assets in
one issuer while retaining the efficiency of the exemption for
corporate and institutional investors. The amendment also addresses
a CSA concern that the amount invested is not a good proxy for
individual investors' sophistication or ability to withstand
The Ontario Securities Commission proposes to amend the
definition of accredited investor to allow fully managed accounts
to purchase investment fund securities in Ontario. This change
would harmonize the managed account category of the AI Exemption
Request for comments
The CSA welcomes all comments on the Proposed Amendments.
Comments must be submitted in writing on or before May 21,
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Under the Income Tax Act, the Employment Insurance Act, and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions or GST.
Under the Income Tax Act, the Employment Insurance Act, the Canada Pension Plan Act and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions.
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