Canada: Changes To NI 45-106 And CP 45-106: Get Ready For Your Next Private Placement

Last Updated: July 24 2015
Article by Bruno Caron and Jean Bernard Ricard

On May 5, 2015, several amendments to the Canadian prospectus exempt regime came into force including changes to National Instrument 45-106–Prospectus Exemptions ("NI 45-106"), and to its Companion Policy ("CP 45-106").

Of particular importance are the changes relating to the Accredited Investor ("AI") and minimum amount investment prospectus exemptions. CP 45-106 now includes more detailed guidance on the obligation for issuers to verify purchaser status particularly for exemptions based upon the characteristics of the potential purchaser. A person distributing or trading securities now has to verify if the purchaser of a prospectus exempt security meets the characteristics necessary to determine when a prospectus exemption is available. This new purchaser status-verifying obligation requires issuers to request details on how prospective purchasers fit within the applicable exemption. In addition, issuers will no longer be able to rely on standard purchaser representations contained in commonly used subscription agreements. Consequently, issuers must now play a more active role in the distribution process.

The former version of CP 45-106 required issuers to keep documentation to show that a person properly relied on an exemption. However, the amended CP 45-106 now recommends that those relying on an exemption should have processes in place to ensure that those responsible for identifying or approaching potential purchasers on behalf of the issuer fully understand the conditions of the exemption sought. To comply with the new recommendation in CP 45-106, issuers will need to gather more details about a potential purchaser and not limit their inquiry to asking whether a given purchaser qualifies for an exemption. For example, with respect to the AI exemption, it is now important for an issuer to gather information on: (a) how the issuer identified or located the potential purchaser; (b) what category of AI the potential purchaser claims to be; and (c) how much and what type of background information is known about the potential purchaser in order to reasonably confirm that the potential purchaser meets the condition for the AI exemption. This information gathering process must also be documented and we recommend that it be kept for a period of eight years (to align with the period NI 45-106 requires a Risk Acknowledgment Form to be kept) and be in a format readily available.

In light of these amendments, we recommend that issuers establish policies and procedures in order to streamline the information gathering process, record such information, and ensure compliance with all aspects of NI 45-106, and specifically ensure:

  • The policies and procedures require issuers, and persons acting on their behalf, to be able to explain the conditions of the prospectus exemption relied upon. This includes understanding and being able to explain to a potential purchaser the meaning of legal terminology used in NI 45-106. For example, a person relying on the AI exemption should be able to explain to a potential purchaser the nuances of the terms "financial assets" and "net assets" used in the AI definition.
  • The policies and procedures require issuers, and persons acting on their behalf, to verify if the potential purchaser meets the conditions of the prospectus exemption relied upon. For example, a person relying on the AI exemption should describe the conditions of the exemption to potential purchasers and gather information from the potential purchasers to confirm their status. For an AI, this could include asking the potential purchaser questions about their income or assets in order to establish that they fit the characteristics of the exemption. A standardized questionnaire shouldbe developed for this purpose.
  • The policies and procedures include record keeping obligations. The issuers, and the persons acting on their behalf, should ensure that each purchaser sign such documentation before distributing the securities to that purchaser.

Creating such policies and procedures, along with a questionnaire, is good business practice for an issuer for the following reasons:

1. Preparedness

The amendments have already come into effect. Drafting policies and procedures and designing a questionnaire to ensure compliance ahead of future transactions will help speed up and streamline the information gathering process and the training of staff. This will greatly assist issuers should an investment window open up in the future.

2. Defence in case of investigation

In the event that a private placement is subsequently investigated by securities regulatory authorities, having compliant CP 45-106 policies and procedures and a questionnaire already in place may act as the basis for a defence.

3. Standardizing internal information gathering process

Creating policies and procedures and a questionnaire provides for the standardization of the information collection process, which results in fewer errors and ensures proper compliance with regulation. By completing the same questionnaire for each purchaser, accurate information about each participating purchaser can be gathered and analysed for future reference.

4. Recordkeeping purposes

Having written policies and procedures in place and having one predetermined questionnaire allows an issuer to have a well-organized file for each purchaser and each private placement.

Our Securities Practice Group has worked with numerous issuers to create policies and procedures and designed model questionnaires to comply with CP 45-106. We can assist you in putting such policies and procedures and questionnaires in place for your business should you wish.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Bruno Caron
Jean Bernard Ricard
In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.