Amendments to National Instrument 45-106 Prospectus and Registration Exemptions

The Canadian Securities Administrators (“CSA“) are adopting amendments to National Instrument 45-106 Prospectus and Registration Exemptions (“NI 45-106“) relating to, among others, the accredited investor and minimum amount prospectus exemptions, and a “family, friends and business associates” prospectus exemption for Ontario. CSA are also modifying and replacing the Companion Policy to NI 45-106. The amendments to NI 45-106 and the Companion Policy in respect of these exemptions are referred to herein as the “Amendments“.

Other changes to NI 45-106, not discussed here, relate to the “short-term debt” prospectus exemption and a new “short-term securitized products” prospectus exemption.


The CSA reviewed certain prospectus exemptions in NI 45-106 as a result of investor protection concerns highlighted by the financial crisis of 2007-2008, and published for comment proposed changes in February of 2014. The Amendments are similar to those previously proposed changes.

Substance and Purpose

The Amendments are primarily intended to address concerns that:

  • some individual investors may not understand the risks of investing under the accredited investor exemption or may not in fact qualify as accredited investors; and
  • the threshold of $150,000 in the minimum amount exemption may not be a proxy for sophistication or ability to withstand financial loss (which was the rationale for adopting the exemption) and may encourage over-concentration in one investment.


The Amendments include the following:

  • the minimum amount exemption will no longer be available for individuals;
  • the introduction of a risk acknowledgement form that must be signed by individual accredited investors, which, among other things, describes the categories of individual accredited investor under NI 45-106, identifies risks related to buying securities in the exempt market and identifies the “salesperson” in relation to the subscription (which includes a representative of the issuer who meets with, or provides information to, the subscriber with respect to his or her investment);
  • expanded guidance on the steps that an issuer and a seller should take to verify the status of purchasers under the capital raising exemptions in NI 45-106, including the accredited investor exemption and the “family, friends and business associates” exemption; and
  • Ontario has adopted a “family, friends and business associates” exemption similar to the existing exemption for other jurisdictions, subject to the requirement to obtain a form signed by, among others, the purchaser and an executive officer of the issuer that acknowledges risks and discloses the relationship that qualifies the purchaser for the exemption.

CSA are also amending a number of instruments and policies to reflect the removal of registration exemptions from NI 45-106 and the consequent change in the title of NI 45-106 from Prospectus and Registration Exemptions to Prospectus Exemptions.

Subject to ministerial approval requirements, the Amendments will come into force on May 5, 2015. Subscription agreements for private placements completed on or after that date will need to be modified to reflect the Amendments.

There are no changes to the forms of report of exempt distribution (Forms 45-106F1 and F6) at this time, but CSA will address changes to those forms in a future notice.

The CSA Notice describing the Amendments (other than the new Ontario exemption), as well as associated documents including the new risk acknowledgment form and blacklined versions of NI 45-106 and the Companion Policy are available here. The new Ontario exemption and changes to associated documents are available here.

Please feel free to contact us to discuss the Amendments and how they might impact your capital raising plans.