The accredited investor exemption is a way companies and investment funds raise money without being required by securities laws to file a prospectus (Canada) or registration statement (U.S.).  To be an accredited investor, an investor must satisfy certain income or net worth criteria.

Securities regulators in both Canada and the United States have stated that it is not sufficient for issuers/dealers to simply rely on an investor initialing or checking a box in an Accredited Investor Certificate (or a schedule to a subscription agreement) indicating that the investor is an accredited investor.   In Ontario, the Ontario Securities Commission Staff Notice 33-735  states the issuer/dealer selling the security is responsible for determining whether an investor meets the definition of accredited investor and is therefor eligible to participate in the private placement.   According to the OSC, the issuer/dealer must have “sufficient information to determine whether the [purchaser] qualifies as an Accredited Investor”.

Similarly, in the United States, the SEC recently stated that the issuer/dealer must take “reasonable steps to verify” the income and/or net worth of the investor.  According to the SEC, whether the steps taken to verify accredited investor status are reasonable will be an objective determination by the issuer/dealer, in the context of the particular facts and circumstances of each purchaser and transaction.  The SEC also stated that third party confirmation is an acceptable way to verify the investor’s status as an accredited investor.

To assist issuers and dealers comply with the private placement exemptions when selling to Canadian investors, we’re pleased to offer an Accredited Investor Verification Service.

As part of our Accredited Investor Verification Service we:

[box] Collect current bank, brokerage and other statements of securities holdings, certificates of deposit, tax assessments, appraisal reports, credit agency reports. [/box]

[box] Review the collected financial data to confirm the investor satisfies the applicable accredited investor criteria. [/box]

[box] Obtain a declaration from the investor confirming that all assets and liabilities necessary to determine the invesor’s net worth have been fully and accurately disclosed. [/box]

[box] Issue a written confirmation verifying  whether the investor is an accredited investor based on either their income or net worth. [/box]

Find out how our Accredited Investor Verification Service is a better way for issuers/dealers to verify income and net worth of investors!

Call or email Koby Smutylo for more information. Phone 613 869 5440.  Email koby@lawyercorporation.ca.