Accredited investors are defined differently in different jurisdictions. The jurisdictions the investor lives in is what governs the term accredited for the purposes of investment even from the US into CDN companies. That is assuming such investments are legal at all, which I believe they are with a declaration to the SEC that the person wishes to be governed by CDN regulations.
In times gone by this was once described as a sophisticated investor and was also defined by a person having made a 150,000 PP in a company as perhaps a seed investor. One could also claim accredited from having a total family income of $250,000 per year.
There were and I believe still are, several ways in which a person can qualify to be called accredited. In Canada now this has changed markedly such that in Ontario requires a company or a person to have a net worth of 5 million dollars from all assets to be called accredited. However in BC and Alberta and in the US it is much easier to qualify. I believe the net worth requirements of BC is only 500K in total assets or 100,000 in family income per year. BC is the easiest with the lowest net worth and earnings of the CDN jurisdictions. The US net worth requirement I believe in most jurisdictions is 1 million in total.
One can in BC qualify as what is called an exempt purchaser, which is far less rigorous than being an accredited investor per se.
NI 45-106 provides an exemption from the registration and prospectus requirements of the securities legislation to an investor who qualifies as an accredited investor and purchases the securities as principal. The definition of accredited investor found in NI 45-106 is a combination of the definitions contained in the earlier regulatory instruments from the various jurisdictions. The definition includes both institutional and individual categories. As with prior definitions of accredited investor, there continues to be no minimum level of investment in order to rely on the exemption.
To be an accredited investor as defined under National Instrument 45-106 Prospectus and Registration Exemptions ("NI45-106") of the Canadian Securities Administrators, you must qualify through at least one of the following criteria:
(a) a person registered under the securities legislation of a jurisdiction of Canada as an adviser or dealer, other than a person registered solely as a limited market dealer under one or both of the Securities Act (Ontario) or the Securities Act (Newfoundland and Labrador);
(b) an individual registered or formerly registered under the securities legislation of a jurisdiction of Canada as a representative of a person referred to in paragraph (a);
(c) an individual who, either alone or with a spouse, beneficially owns, directly or indirectly, financial assets (cash, securities, contracts of insurance, deposits and evidences of deposits that are not securities for the purposes of securities legislation) having an aggregate realizable value that before taxes, but net of any related liabilities, exceeds Cdn.$1,000,000;
(d) an individual whose net income before taxes exceeded Cdn.$200,000 in each of the two most recent calendar years or whose net income before taxes combined with that of a spouse exceeded Cdn.$300,000 in each of the two most recent calendar years and who, in either case, reasonably expects to exceed that net income level in the current calendar year;
(e) an individual who, either alone or with spouse, has net assets of at least Cdn.$5,000,000; or
(f) a person that is recognized or designated by the securities regulatory authority or, except in Ontario and Québec, the regulator as (i) an accredited investor, or (ii) an exempt purchaser in Alberta or British Columbia after September 14, 2005.
Exemptions Covered by NI 45-106
A summary of the most commonly used registration and prospectus exemptions contained in NI 45-106 is set out below. It must be noted that not all of the exemptions have been adopted by all local jurisdictions and there are "carve-outs" such that certain of the exemptions vary among local jurisdictions.
Capital Raising Exemptions
Section 2.1 – Rights Offering.
The existing exemption for a rights offering
made by an issuer to purchase additional securities of such issuer, has been consolidated and the issuer must comply with the requirements of National Instrument 45-101 - Rights Offerings. Except in British Columbia, the regulator or securities regulatory authority has 10 days to object in writing after receipt of the written notice given by the issuer of the proposed rights offering.
Section 2.3 – Accredited Investor. The definition of "accredited investor" differs from that previously contained in Multilateral Instrument 45-103 – Capital Raising Exemptions ("MI 45-103") and Ontario Securities Commission Rule 45-501 –Exempt Distributions ("OSC Rule 45-501"). There are a number of changes, including the addition of entities particular to Quebec, the addition of "an individual who, either alone or with a spouse, has net assets (as opposed to "net financial assets") of at least $5 million”, inclusion of certain investment funds, a definition for "fully managed account" and the inclusion of persons designated by the applicable securities regulatory authority as an exempt purchaser in Alberta or British Columbia.
The exemption is not available for a person created or used solely to purchase or hold securities as an accredited investor described in paragraph (m) of the definition (a person, other than an individual or investment fund that has net assets of at least $5 million as shown on its most recently completed financial statements).
Every jurisdiction, except Ontario includes as an accredited investor, a person that is acting on behalf of a fully managed account and that is registered as an advisor in Canada or in a foreign jurisdiction even when purchasing investment funds. Ontario will continue to study the carve out of such persons when purchasing investment funds.
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