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Types of prospectus exemptions

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Generally, securities offered to the public in Ontario must be issued with a prospectus, but there are exceptions. These exemptions are called prospectus exemptions.

Types of prospectus exemptions

What is a prospectus?

A prospectus is a document that provides detailed information about the security and the company offering it.

Types of prospectus exemptions

#1: Accredited investor prospectus exemption

Allows companies to sell their securities to investors who meet certain income and asset levels to qualify them as an accredited investor. There are no limits on how much accredited investors can invest under this exemption.

Types of prospectus exemptions

#2: Crowdfunding prospectus exemption

Allows Canadian companies, particularly start-ups and early stage companies, to sell securities online though a single portal that is registered with the Ontario Securities Commission. There are limits on how much investors can invest under this exemption based on their income and asset levels.

Types of prospectus exemptions

#3: Existing security holder prospectus exemption

Allows public companies listed on certain stock exchanges to sell securities to their existing investors. Existing investors have a $15,000 investment limit, which can be exceeded if they receive advice from an investment dealer on the suitability of the investment for that investor.

Types of prospectus exemptions

#4: Family, friends and business associates prospectus exemption

Allows companies to sell securities to the owners, officers and directors of the business, their immediate family, close personal friends and close business associates. There are no limits on how much investors can invest under this exemption.

Types of prospectus exemptions

#5: Minimum amount investment prospectus exemption

Allows companies to sell securities to an investor who is not an individual person (such as a company) provided the purchase price of the security is at least $150,000 and is paid in cash at the time of the purchase.

Types of prospectus exemptions

#6: Offering memorandum prospectus exemption

Allows companies to sell securities to a wide range of investors based on an offering memorandum (a document that outlines a company’s business and affairs) being made available. There are limits on how much investors can invest under this exemption based on their income and asset levels.

Types of prospectus exemptions

#7: Rights offering prospectus exemption

Allows public companies to sell securities to their existing security holders. Rights to purchase securities are issued by the company and distributed to security holders on a pro rata basis. There are no limits on how much investors can invest.

Types of prospectus exemptions

Check registration before you invest

The availability of a prospectus exemption to distribute securities does not mean there is a corresponding registration exemption. Learn more about who needs to register to sell in the exempt market.

Types of prospectus exemptions

Learn more about the exempt market

For further information on the exempt market and the rules of each of the prospectus exemptions, visit GetSmarterAboutMoney.ca.

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