AB and SK Adopt Self-Certified Investor Prospectus Exemption

Author: Jessica Zhang

Alberta and Saskatchewan have adopted the Self-Certified Investor Prospectus Exemption designed to provide issuers greater access to capital and broaden investment opportunities for Alberta and Saskatchewan.

On March 31, 2021, the Alberta Securities Commission and the Financial and Consumer Affairs Authority of Saskatchewan (collectively the “Regulators”) adopted a new Self-Certified Investor Prospectus Exemption (the “Exemption”) which allows investors who attest to having a certain level of financial and investment knowledge to participate in exempt distributions.

The Regulators are implementing the Exemption on a three-year interim basis, from March 31, 2021, to April 1, 2024, for securities distributed by issuers in Alberta and Saskatchewan to investors in Alberta and Saskatchewan.

Summary of the Self-Certified Investor Prospectus Exemption

The Exemption is intended to allow investors in Alberta and Saskatchewan who do not meet the financial thresholds or other criteria required to qualify as accredited investors (as defined in National Instrument 45-106 – Prospectus Exemptions (“NI 45-106”)) to invest alongside accredited investors, provided that they meet other criteria intended to demonstrate the investor’s financial and investment knowledge.

Self-certified investors are permitted to invest, in a calendar year, up to $10,000 in a single issuer and up to $30,000 in aggregate in multiple issuers (the “Investment Limits”). The Investment Limits do not apply to investments in Listed Issuers (defined below). The distribution by the issuer to a self-certified investor must be concurrent with a distribution to an accredited investor, and the issuer must provide the self-certified investor access to substantially the same information about the securities being distributed as is provided to the accredited investor.

Additionally, the self-certified investor must provide the issuer with a statutory declaration dated within 36 months of the distribution and a completed self-certified investor acknowledgement confirming that the investor meets the Qualifying Criteria (defined below) and has read and understood each of the acknowledgements.

Self-Certified Investor Qualifying Criteria

In the case of an investor who is an individual, the investor must meet at least one of the following qualifying criteria (the “Qualifying Criteria”) in order to be considered a self-certified investor:

  • holds a CFA Charter from the CFA Institute;
  • holds a CIM designation from the Canadian Securities Institute (CSI);
  • holds a CBV designation from the CBV Institute;
  • holds a CPA designation in a jurisdiction of Canada from CPA Canada;
  • holds a CIWM designation from the CSI;
  • was admitted to practice law in a jurisdiction of Canada, and at least one third of the individual’s practice has involved providing advice on financings involving public or private distributions of securities or mergers and acquisitions;
  • holds an MBA with a focus on finance from a Canadian university or an accredited foreign university;
  • holds an undergraduate degree in finance or an undergraduate degree in commerce or business with a major or specialization in finance or investment and that degree is from a Canadian university or an accredited foreign university; or
  • has passed the Canadian Securities Course or both the Series 7 Exam from the Financial Industry Regulatory Authority in the U.S. and the New Entrants Exam from the CSI and meets the minimum net income requirements of $75,000 in each of the two most recent calendar years and reasonably expects to exceed that income level in the current calendar year or, combined with a spouse, $125,000 in each of the two most recent calendar years and reasonably expects to exceed that income level in the current calendar year.

In the case of an investor that is not an individual, the investor must meet at least one of the following qualifying criteria to be considered a self-certified investor:

  • the majority of owners of interests of the investor, direct, indirect or beneficial, are accredited investors or meet the Qualifying Criteria;
  • the majority of directors of the investor are accredited investors or meet the Qualifying Criteria, or
  • the investor is a trust, established or settled by an individual who meets the Qualifying Criteria, which was established for the benefit of that individual’s spouse, former spouse, or a parent, grandparent, brother, sister, child or grandchild of the individual or that individual’s spouse or former spouse.

Distribution to Self-Certified Investors By Listed Issuers

Self-certified investors investing in issuers (the “Listed Issuers”) that have a class of equity security currently listed on the TSX Venture Exchange, the Toronto Stock Exchange, the Canadian Securities Exchange or Neo Exchange Inc. are not subject to the Investment Limits, provided that the Listed Issuer is not in default of the periodic and timely disclosure requirements applicable to it as a reporting issuer and the self-certified investor has received suitability advice regarding the investment from a person or company registered under securities legislation in the jurisdiction of the self-certified investor and is qualified to provide such advice.

Distribution to Self-Certified Investors By Private Issuers

Private issuers are permitted to distribute securities to self-certified investors without losing their private issuer status if they meet the conditions of the private issuer exemption specified in section 2.4 of NI 45-106.

A private issuer that sells securities to anyone that is not on the prescribed list of permitted investors under subsection 2.4(2) of NI 45-106 would lose its private issuer status. In order to allow self-certified investors to invest in private issuers without impairing the issuer’s private issuer status, the Regulators will allow a self-certified investor to be considered “not the public” under subsection 2.4(2) of NI 45-106.

For more information about the Self-Certified Investor Prospectus Exemption, contact one of our corporate finance and securities team members in Alberta or Saskatchewan.

Note: This article is of a general nature only and is not exhaustive of all possible legal rights or remedies. In addition, laws may change over time and should be interpreted only in the context of particular circumstances such that these materials are not intended to be relied upon or taken as legal advice or opinion. Readers should consult a legal professional for specific advice in any particular situation.