Manitoba adopts the Self-Certified Investor Prospectus Exemption

In a recent article, we encouraged The Manitoba Securities Commission (the “MSC”) to consider adopting the self-certified investor prospectus exemption (the “Exemption”) which had been in force in Alberta, Saskatchewan and Ontario for years.

The Exemption provides qualified persons in Manitoba with an exemption from the prospectus requirements under applicable securities laws, subject to strict requirements and limitations on their investments, which are explained in detail in this article.

We are pleased to report that the MSC has since issued Blanket Order 45-505 – Re: Self-Certified Investor Prospectus Exemption (the “Order”) which officially makes the Exemption available in Manitoba effective October 10, 2024.

Key features of the Self-Certified Investor Prospectus Exemption in Manitoba

Modelled after the framework of Alberta and Saskatchewan, rather than Ontario, the Exemption has the following key features:

• For the issuer to be eligible for the Exemption, the head office of the issuer must be in Alberta, Saskatchewan or Manitoba;
• The investor must purchase the securities as principal;
• Not less than 36 months prior to the distribution date of the securities, the investor must have completed a statutory declaration that they meet the qualifying criteria under the Order and have read and understood a regulated set of risks associated with the investment. Forms of statutory declaration and risk acknowledgement are included with the Order. The issuer must retain a copy of the statutory declaration for a period of eight (8) years from the date of distribution;
• The aggregate acquisition cost of the securities of any single issuer acquired by the investor in the last 12 months under the Exemption or a corresponding exemption cannot exceed $10,000, provided that:
  • such limit does not apply to a distribution of securities where the issuer is listed on a Canadian public stock exchange (the “Listed Issuer”),
  • the Listed Issuer is not in default of the periodic and timely disclosure requirements applicable to it as a reporting issuer and
  • the investor in the Listed Issuer has had suitability advice on by a qualified person or company;
• The subscription agreement between the issuer and an investor for any purchase of securities using the Exemption must contain contractual representations that the aggregate cost of the securities of all issuers acquired by the investor in the last 12 months under the Exemption, or a corresponding exemption, other than a Listed Issuer, does not exceed $30,000. The issuer cannot know or reasonably be expected to know that that this statement is false;
• The distribution to an investor using the Exemption must be made concurrently with a distribution to an accredited investor and that investor must have the same information about the securities as would be provided to an accredited investor;
• For issuers that are not private issuers, they must file a report on System for Electronic Data Analysis and Retrieval Plus (SEDAR+) for any distributions in Manitoba within 10 days of the distribution in the form of Form 45-106F1 – Report of Exempt Distribution and pay the applicable fee;
• The exemption allows for the use of special purpose vehicles (“SPVs”), provided that all of the owners of interest, direct, indirect or beneficial of that SPV, except the voting securities required by law to be owned by directors, are accredited investors and/or self-certified investors and each beneficial owner that is a self-certified investor does not contribute more than 25% of the total funds invested in the SPV; and
• The first trade of the securities acquired using the Exemption is subject to resale restrictions in National Instrument 45-102 – Resale of Securities and not eligible under Manitoba’s open system in accordance with Local Rule 45-806 – Resale Restrictions Applicable to National Instrument 45-106.

Criteria for self-certified investors in Manitoba

Under the Exemption, to be a “self-certified investor” in Manitoba, that individual must meet one of the following criteria:

1. Hold a Charted Financial Analyst (CFA) designation from the CFA Institute or any predecessor or successor organization;
2. Hold the Chartered Investment Manager (CIM) designation from the Canadian Securities Institute, a Division of Moody’s Analytics Global Education (Canada) Inc. or any predecessor or successor organization;
3. Hold the Chartered Business Valuator (CBV) designation from the CBV Institute or any predecessor or successor organization;
4. Hold a Chartered Professional Accountant (CPA) designation from CPA Canada;
5. Hold a Certified International Wealth Manager (CIWM) designation from the Canadian Securities Institute, a Division of Moody’s Analytics Global Education (Canada) Inc. or any predecessor or successor organization;
6. Admitted to practice law in a jurisdiction of Canada and at least one third of the individual’s practice has involved providing advice in respect of financings involving private or public distributions of securities or mergers and acquisition transactions;
7. Hold a Master of Business Administration (MBA) degree, focused on finance, from a university in Canada or from an accredited university in a foreign jurisdiction;
8. Hold an undergraduate degree in Finance or hold an undergraduate degree in Business or Commerce with a major or specialization in finance or investment, from a university in Canada or from an accredited university in a foreign jurisdiction; and/or
9. Has passed the Canadian Securities Course Exam in Canada or both the Series 7 Exam and the New Entrants Exam in the United States and had net income before taxes exceeding $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 had net income before taxes with a spouse, exceeding $125,000 in each of the two most recent calendar years and reasonably expects to exceed that income level in the current calendar year.

The adoption of the Exemption has the potential to unlock a new pool of prospective investors.

We continue to welcome policies to open up access to capital to companies in Manitoba and look forward to seeing how the market responds to the adoption of the Exemption.

If you are considering using the Exemption to raise capital in the public or private markets in Manitoba, please consider contacting Kyle Mirecki in Winnipeg.

Note: This article is of a general nature only and is not exhaustive of all possible a 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.

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