A prospectus is a document that provides detailed information about the security and the company offering it.
Investments like debt, equity, asset-backed securities, investment funds and derivatives can be sold in the exempt market.
Prospectus exemptions can help businesses because they let them raise money in less time and with less cost than preparing a prospectus.
There are many different types of prospectus exemptions, each with its own rules about who can sell securities and who can buy securities under the prospectus exemption.
Individuals, firms or online portals that are in the business of trading or advising in securities are required to register as a dealer or portfolio manager.
Some scammers pitch fraudulent investments as “exempt” securities. Learn more about investment scams.
Investing in the exempt market is risky. You could lose your entire investment.
Companies raising money through prospectus exemptions may not be required to provide the same amount of information to their investors as a public company would be required to do.
There is a risk that you can’t sell your securities when you need or want to. Exempt securities often aren’t publicly traded, so you might not be able to sell your investment quickly or at all when you need or want to. This is also known as liquidity risk.
Read more about the exempt market and different types of prospectus exemptions at GetSmarterAboutMoney.ca.