Securities regulators amend investment limits for offering memorandum exemption

Canadian securities regulators have made changes to give investors greater access to exempt markets.

On April 17, 2025, the securities commissions of Alberta, New Brunswick, Nova Scotia, Ontario, Quebec and Saskatchewan each issued, as part of a coordinated effort, a blanket order (collectively, the blanket orders) amending one of the investment limits under the offering memorandum exemption (the OM exemption) contained in National Instrument 45-106 – Prospectus Exemptions (NI 45-106). The blanket orders are referred to as Coordinated Blanket Order 45-933 – Exemption from the Investment Limit under the Offering Memorandum Prospectus Exemption to Exclude Reinvestment Amounts.

The change

Under the OM exemption, investment limits apply to investments by individuals. Particularly, the acquisition cost of all securities acquired in an issuer pursuant to the OM exemption in the preceding 12 months may not exceed the following amounts: 

• $10,000 for non-eligible investors;
• $30,000 for eligible investors; or 
• $100,000 for eligible investors who receive advice from “a portfolio manager, investment dealer or exempt market dealer” that the investment is suitable.

These investment limits were intended to strike a balance between investor protection and facilitating investments in the exempt market. 

The blanket orders amend the investment limits by providing that proceeds of disposition reinvested by an eligible investor in the same issuer do not count towards the 12-month $100,000 investment limit, provided the reinvested amount does not exceed $100,000. 

To rely on the blanket orders, the eligible investor must have received advice from “a portfolio manager, investment dealer or exempt market dealer” that both the reinvestment amount and any new investment made under the OM exemption are suitable for the investor. This allows eligible investors to reinvest returns up to a maximum of $100,000 and participate in greater financing opportunities without being constrained by the $100,000 investment limit set out in NI 45-106. 

An issuer relying on a blanket order in either Ontario or Nova Scotia must give written notice to the relevant securities commission within 10 days of completing the securities distribution. 

Practical implications 

We agree with the objectives sought by regulators and recommendation by the Capital Markets Modernization Taskforce: to facilitate capital-raising opportunities for issuers and allow investors to participate in more exempt market opportunities. The blanket orders allow investors to keep their capital invested in the exempt market. This is an important step towards greater access to exempt markets while maintaining the regulators’ mandate of investor protection.

The blanket orders may be useful to investors in the following circumstances:

• termed investments that repay at a specified period and reinvestment is available;
• swapping investments within the same issuer (such as equity to debt or between fee structures); or
• tax planning. 

However, the blanket orders’ effectiveness in facilitating greater investment into or keeping investments in the exempt markets through the OM exemption may be muted for the following reasons:

• Investors are unlikely to receive proceeds of disposition unless an investment is being exited or there is a liquidity event. If any such event occurs, it is unlikely that investment in the same issuer will be available unless the disposition is part of a recapitalization transaction. Furthermore, issuers may limit capital raising during the period prior to a fund-wide liquidity event.
• Many exempt market issuers have adopted distribution reinvestment plans (DRIP) permitting reinvestment in the same issuer pursuant to a plan on a prospectus-exempt basis under Section 2.2(1)(a) of NI 45-106 with no investment limit. For investors participating in an issuer’s DRIP, the utility of the blanket orders may be limited.

While the blanket orders expand reinvestment potential, we encourage regulators to continue to consider ways to expand access to exempt market opportunities, for example, by: 

• Permitting additional investment or reinvestment into affiliated issuers. Investors can reward successful management teams with additional investment into an affiliated issuer, such as another investment vehicle managed by the same team or a continuation fund.
• Allowing investment of proceeds into other issuers with a similar investment strategy as part of an investor’s portfolio diversification.

Effective date

The blanket orders took effect on April 17, 2025, and remain effective in each jurisdiction until the date set out in the respective blanket order unless extended.

The authors would like to thank Elizabeth Pierman, articling student, for her contribution to preparing this legal update.