As development of private placement exemptions continues,
securities regulators in British Columbia, Alberta, Saskatchewan,
Manitoba and New Brunswick have adopted another exemption to the
prospectus requirement (the "Investment Advice
Exemption"). Subject to certain conditions, a
reporting issuer may rely on the Investment Advice Exemption where
securities are distributed to non-accredited investors who have
obtained investment advice from a registered investment dealer. The
Investment Advice Exemption became effective on January 14,
The introduction of the Investment Advice Exemption comes on the
heels of a number of other private placement exemptions recently
introduced by members of the Canadian Securities Administrators.
For more information relating to these exemptions, see our Updates
dated February 23, 2015, Update on Continuing Refinements to
Private Placement Rules; October 26, 2015, Further
Developments in Private Placement Exemptions for Start-ups;
November 3, 2015, Offering Memorandum Exemption Finalized for
Ontario; and November 10, 2015, Equity Crowdfunding
The Investment Advice Exemption is intended to provide reporting
issuers with greater access to capital and to allow a broader
subset of retail investors to participate in private placements. To
ensure such investors are adequately protected, the Investment
Advice Exemption includes the following requirements:
the investor must have obtained
advice about the suitability of the investment and, where the
investor is resident in a Canadian jurisdiction, the advice was
obtained from a registered investment dealer in that
the investor must purchase the
security as principal;
the issuer must be a reporting issuer
in at least one Canadian jurisdiction, have a class of equity
securities listed on the TSX, TSX-V, Canadian Securities Exchange
or Aequitas Neo Exchange Inc. and have filed all required
continuous disclosure documents;
the offering can consist only of a
listed security, a unit consisting of a listed security and a
warrant to acquire another listed security, or another security
convertible into a listed security at the security holder's
the news release announcing the
private placement must disclose certain required information
relating to the distribution; and
except in Alberta, where a statutory
right of action applies, the investor must be provided with a
contractual right of action in the event of a misrepresentation in
a continuous disclosure document, regardless of whether the
investor relied on the misrepresentation.
The content of this article does not constitute legal advice
and should not be relied on in that way. Specific advice should be
sought about your specific circumstances.
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