Investing with an Offering Memorandum

Investing with an Offering Memorandum

Earlier last month I promised a basic primer on exempt market products, hope this provides a little more clarity.

(2011 Exempt Market Regulations Update)


In Canada, businesses (or government) may raise capital by selling securities in one of two ways.

They can prepare a disclosure document called a prospectus, which contains regulator reviews for completeness, a full disclosure of risks and a full disclosure of material facts.

Or, under certain conditions, they can be exempt from the obligation to prepare a prospectus in order to sell securities, and prepare an Offering Memorandum (OM), instead – ‘prospectus exempt’ or ‘exempt market’ securities.
(Most exempt market products provide an Offering Memorandum that includes full disclosure of risks, and material facts). 

Products may be prospectus exempt if they are to be sold to accredited investors (or to friends and family)

Exempt Market securities may include equipment leasing portfolios,  real estate limited partnerships, promissory notes, mortgage investment corporations, land developments and factoring corporations. Exempt Market products are an important part of the Canadian financial system – with billions of dollars invested each year. (Stats Canada report on RRSP contributions for 2010)

Offering Memorandum (Exempt Market) investment products provide opportunities that wouldn’t otherwise be available. New regulations that provide for Exempt Market products to come under scrutiny help the investor explore these opportunities with greater confidence.

As I discussed in an earlier post, new regulations have come in to regulate who may trade in exempt market products. These regulations help manage the risks for the consumer.

Now, Exempt Market Dealers must:
• Pass the Canadian Securities course exam
• Pass an Exempt Market Products Exam (or satisfy the proficiency requirements).
• Maintain bonding or insurance for each employee relative to the total client assets held.
• Must deliver annual financial statements for the financial year.
• Are restricted from lending to clients.
• Must provide certain disclosure to clients when recommending the use of borrowed money.

We’re excited about the expanded opportunities for the Evolution Fund with the introduction of these EMD regulations.

Wishing you prosperous opportunities, today.

Cheers, Tess.

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