On June 15, 2017, the Ontario Securities Commission (“OSC”) released OSC Staff Notice 45-715, 2017 Ontario Exempt Market Report (“Report”) which summarizes capital raising activity in 2015 and 2016 by corporate (non-investment fund) issuers in Ontario’s exempt market. The Report also examines the impact of recently introduced prospectus exemptions which were designed to facilitate capital raising for small and medium-sized enterprises (“SMEs”). The recently introduced prospectus exemptions include:

  • Existing security holder exemption – February 11, 2015
  • Family, friends and business associates exemption – May 5, 2015
  • Offering memorandum exemption – January 13, 2016
  • Crowdfunding exemption – January 25, 2016


In 2016, Ontario residents invested approximately $72 billion in over 2,500 non-investment fund issuers through prospectus-exempt offerings. Canadian issuers accounted for only 37% ($27 billion) of the capital raised in Ontario, but represented almost two-thirds of issuers (approximately 1,600 issuers) participating in Ontario’s exempt market in 2016.

The key findings highlighted in the report include:

  • Approximately 57% of Canadian issuers participating in Ontario’s exempt market were small issuers, defined as issuers raising less than $1 million annually. Notwithstanding the large number of small issuers, they only accounted for less than 1% of annual gross proceeds raised by Canadian issuers.
  • In 2016, the number of small Canadian issuers and the gross proceeds raised by these issuers rose significantly, by 30% and 40%, respectively. This increased activity was concentrated among small Canadian issuers in three main industries: natural resources, consumer goods and services, and real estate and mortgage finance.
  • The Report found that since the new prospectus exemptions were introduced starting in 2015, they have been supported by a significant amount – 25% – of Canadian issuers. In 2016, approximately 400 issuers relied on the new prospectus exemptions to raise approximately $133 million, with close to half of these issuers raising capital in Ontario for the first time since 2014.
  • Natural resource issuers were the largest issuers relying on the prospectus exemptions Among issuers relying on the new prospectus exemptions at 37%, while real estate and mortgage finance issuers accounted for most capital raised at 70%.
  • Accredited investors, mainly institutional investors, contributed over 90% of the total capital invested in the Ontario exempt market. However, most of the capital was invested in large issuers, primarily foreign-based and consisting of financial entities such as banks, private equity funds, and asset-backed structured finance vehicles.
  • Within the context of the broader Canadian capital market, Ontario’s exempt market accounted for less than one-fifth of the total gross proceeds raised by Canadian issuers domestically and less than one-tenth of gross proceeds raised globally.

OSC Staff Notice 45-715 2017 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.

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