Many aren’t aware the exempt market is much larger than the stock market. But governments are, and regulators are promising to crack down on this largely unregulated market with stricter controls and smaller investing limits.

Read: Regulators won’t stop at CRM2

With the amount of money at stake, investors are right to ask, “Do regulators know what they’re getting into?”

Professor Jack Mintz, director of The School of Public Policy at the University of Calgary, has released a report that aims to answer that question.

“Much more data and study of the exempt market is needed before we rush into the kinds of regulations that Quebec, Ontario, Alberta and Saskatchewan are considering – like a lower investment limit.”

Read: OSC releases risk questionnaire

Mintz says there are three reasons proposed regulation needs to be reconsidered:

“First is the lack of knowledge about this market. Regulators have a responsibility to fully understand the size, scope and operations of this market before attempting to further regulating it. Second, no substantive need has been demonstrated to cap contributions made by eligible investors to $30,000. This is a solution to a problem that has not been clearly articulated.

“Finally, proposed regulations aimed at limiting the number of investors in the exempt market could actually discourage solid firms from entering the market, and leave only less stable companies behind.”

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