We applaud the participating jurisdictions for taking steps to harmonize the self-certified investor prospectus exemption among them. We believe that making the eligibility criteria and the application of the exemption consistent among jurisdictions will result in less confusion, improved compliance with the exemption and ultimately will improve outcomes for registrants, issuers and investors.
Clients of fiduciary portfolio managers benefit from strong investor protection, given that investments are made in the client’s best interest by a qualified advising representative. This is recognized in NI 45-106 Prospectus Exemptions (NI 45-106), where higher investment limits apply to eligible investors who have obtained advice from a registered adviser, and managed accounts advised by a registered portfolio manager generally qualify as accredited investors.
Nonetheless, in our view, it is appropriate to look to factors such as knowledge, experience, education and professional credentials to determine eligibility for the prospectus exemptions, rather than narrowly focusing on wealth. We are of the view that wealth alone does not indicate an investor’s sophistication or investment knowledge. However, it is imperative that appropriate protections and parameters be implemented to ensure that all investors are properly educated and protected when investing in the exempt market.
Our key recommendations are:
- Harmonize the self-certified investor prospectus exemption among the participating jurisdictions
- Implement an investment limit of $30,000 annually
- Monitor the use of the exemption to determine whether it achieves the desired outcomes and appropriately mitigates risks to investors
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