On February 27, 2019, the Ontario Securities Commission released OSC Staff Notice 45-716, Exempt Market Report, 2018 (Staff Notice 45-716, The Exempt Market Report), which provides an overview on the state on the Ontario exempt markets in 2017.

The findings highlighted in the Exempt Market Report will help OSC staff as they continue to monitor the exempt market from an operational compliance perspective and to understand its role in capital formation for future policymaking.

Key take-aways from the Exempt Market Report include:

  • Capital raised from institutional investors accounts for approximately $89.4 billion (or 98%) of the total capital invested in Ontario’s exempt market.
  • Individual investors contributed $2.2 billion (2%) of the total capital invested in the exempt market in Ontario and represented a large proportion (77%) of the approximately 28,500 exempt market investors.
  • Approximately 39% of the total capital invested by individual investors and 10% of the total capital invested by institutional investors went toward real estate or mortgage investments.
  • Approximately 37% or 700 of Canadian issuers in the province’s exempt market were small issuers, raising $194 million, which accounted for less than 1% of the total capital raised in 2017. Significantly, 47% of small issuers were junior mining companies with 96% in the exploration stage. Most of these junior mining companies were listed on a Canadian exchange and relied mainly upon the accredited investor exemption to raise capital.
  • Other Canadian issuers that raised capital in Ontario’s exempt market were also largely based in sectors such as manufacturing, technology, and life sciences.
  • In 2017 while the total capital raised under the offering memorandum and family, friends, and business associates exemptions rose to $327 million, representing use by 600 Canadian issuers in the province’s exempt market, most issuers relied on other exemptions, chiefly the accredited investor exemption, under which a total of $1.5 billion was raised.
  • The offering memorandum exemption was largely used by real estate and mortgage investment entities.
  • In 2017 there was no reported use of the crowdfunding prospectus exemption. However, the regulator does note that there have been several exempt market dealers and other registered entities that have facilitated a crowdfunding-like model to raise capital predominantly from accredited investors.

OSC Staff Notice 45-716, Exempt Market Report, 2018  is available for download from the website of the Ontario Securities Commission.

For more information, please call Barbara Hendrickson at BAX Securities Law (416) 601 -1004.

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.