The $150,000 Minimum Investment Exemption in Canada – Proposed Changes

hIn Canada, an issuer does not have to provide an investor with a prospectus if an investor purchases, as principal, a security of a single issuer and pays $150,000 or more in cash at the time of the investment. This is a simple prospectus exemption that is based on a minimum investment amount (the MA Exemption). The MA Exemption is a nationalized and harmonized prospectus exemption in Canada and requires a report of trade to be filed and fee to be paid to the applicable Canadian securities regulator.


According to the Canadian Securities Administrators (the CSA), the MA Exemption raises the second highest amount of capital ($5.6 billion or 3.7% of total invested in 2011 by Canadians), after the accredited investor exemption. However, when the CSA considered the number of times investors invested under the MA Exemption, they found that it was relied on less than 1% of the time for distributions to Canadian investors.

According to the CSA, the majority of individuals invest between $150,000 and $200,000 when investing under the MA Exemption and when investors can choose how much to invest, they generally invest much less than $150,000. For example, the CSA states that most individuals invest $30,000 or less when investing under the accredited investor exemption.

Proposed Change

In February 2014, the CSA published for comment proposed changes to the MA Exemption that would make it unavailable for individual investors. This is a big change!

Concerns over the MA Exemption

The CSA is proposing this change since it believes the MA Exemption lacks certain investor protection safeguards. For example, the MA Exemption:

– does not require issuers or investors to engage the services of a registrant which has “know-your-product”, “know-your-client” requirements and most importantly, a suitability obligation which provides investors with some protection against making inappropriate investments;

– does not require any form of offering document with information about the security and/or the issuer;

– does not require an investor to sign or be provided any risk acknowledgement or disclosure form;

– does not prohibit an investor from obtaining a loan to make an investment of $150,000 or more;

– does not distinguish between simple versus novel or complex investment products;

– does not distinguish between private issuers and public issuers with exchange-listed securities which have publicly available information on SEDAR and price transparency;

– does not prohibit an investor from making an investment of $150,000 or more in the event of a sudden windfall like an inheritance; and

– may lead investors into making highly concentrated investments which may not reflect prudent portfolio construction or diversification.

Simply, a minimum investment of $150,000 is a poor proxy of investor sophistication.

Should the CSA consider other alternatives?

Some believe the proposed changes to prevent individuals from relying on the MA Exemption is a welcome change that is long overdue. Others believe the CSA should:

  • retain the MA Exemption in its current form;
  • adjust the $150,000 threshold, perhaps based on some formula; and/or
  • use alternative qualification criteria.

What do you think? Please share your comments


This blog is not intended to create, and does not create an attorney-client relationship. You should not act or rely on information on this blog post without first seeking the advice of a lawyer. This material is intended for general information purposes only and does not constitute legal advice. For legal issues that arise, the reader should consult legal counsel.

Koscak_bBrian Koscak is a Partner at Cassels Brock & Blackwell LLP located in Toronto, Ontario and Chair of the Private Capital Markets Association of Canada (formerly, the Exempt Market Dealers Association of Canada). Brian is also a member of the Ontario Securities Commission’s Exempt Market Advisory Committee and Co-Chair of the Equity Crowdfunding Alliance of Canada

Brian can be reached by phone at 416-860-2955, by e-mail at or on twitter @briankoscak. Brian also regularly writes about Canadian securities law matters on his personal blog at