On January 22, 2021, the Capital Markets Modernization Taskforce (Taskforce) released its final report (Report). The Taskforce was established by the Ontario Provincial Government to help transform the regulatory landscape for the capital markets sector, and advise the Minister of Finance on how to improve the innovation and competitiveness of the Province’s capital markets and best help build Ontario’s economy.

The Report includes 74 policy recommendations designed to amend securities laws in the following areas:

  • improving regulatory structure to enhance governance
  • improving competitiveness through regulatory measures
  • ensuring a level playing field between large and small market players
  • improving the proxy system, corporate governance and the process of mergers and acquisitions
  • fostering innovation
  • modernizing enforcement and enhancing investor protection

Because of the far reaching nature of the numerous recommendations, BAX will do a series of articles over the next few weeks on recommendations of interest to small and midcap issuers and the registrants that service them. 

Recommendation #12 Changes to the Definition of Accredited Investors for Reporting Issuers

Currently, securities issued by any issuer under certain prospectus exemptions set out in in National Instrument 45-106 Prospectus Exemptions (NI 45-106), such as the accredited investor (AI) exemption, are subject to a four-month restricted period before becoming freely tradable. This hold period timeframe was originally put in place to reflect the time required for the dissemination of news in a non-digital capital markets environment.

The Report recommends that, for reporting issuers or public companies who distribute securities under the AI prospectus, exemption be subject to a 30 day hold period where the reporting issuer has developed a continuous disclosure record of at least 12 months after filing and obtained a receipt for a prospectus or the filing of a filing statement in the case of a reverse-takeover transaction or Capital Pool Company.

Reporting issuers that file their disclosure on a semi-annual basis should be excluded from the reduced hold period. The Report recommends that the 30 day hold period be eliminated altogether after two years.

The reporting issuer and any dealer involved in the distribution would still be required to take reasonable steps to ensure that the initial purchaser is properly relying on the AI exemption and is purchasing as a principal and not with a view to further distribution.

For a full copy of the Report:

For more information, please call Barbara Hendrickson at BAX Securities Law (647) 403-4606.

This publication is not intended to constitute legal advice. No one should act on it or refrain from acting on it without consulting with a lawyer. BAX does not warrant or guarantee the accuracy or currency or completeness of the publication.  No part of this publication may be reproduced without the prior written permission of BAX Securities Law.