OSC tests out education, experience exemption

The Ontario Securities Commission (OSC) launched a pilot project to test a new investor exemption that’s based on education and experience.

The 18-month pilot (which runs from Oct. 25 to April 25, 2024) will allow investors with certain industry accreditations or experience to take advantage of a prospectus exemption that doesn’t rely on income- or asset-based tests.

Investors will be able to self-certify that they meet at least one of the criteria for the exemption. The criteria include holding certain financial qualifications (including the CFA, CIM, CSC and CPA, among others), a finance degree (undergrad or MBA) and specific experience in the issuer’s sector.

Investors are limited to committing $30,000 per year under the exemption, which can be in a single investment or spread across multiple issuers.

The initiative follows a recommendation from the Capital Markets Modernization Taskforce — which called for an expansion of the accredited investor exemption based on proficiency and experience — and the resulting expansion of the OSC’s mandate to include fostering capital formation.

In a notice, the regulator said expanding the availability of exemptions represents a potential added source of capital for issuers, while increasing investors’ investment opportunities.

“This pilot recognizes that there is a growing pool of sophisticated retail investors in Ontario, whose education and work experience have aptly prepared them to assess investment risks,” said Grant Vingoe, CEO of the OSC, in a release.

“It also reflects the reality that many Ontarians have multiple freelance roles during their careers in which they utilize and develop specialized skills that can support their investment activities,” he added.

Under the pilot, issuers must file reports tracking the use of the self-certified prospectus exemption, which the OSC will use to monitor its use and to inform future policy-making.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.