OSC Eases Restrictions on Access to Private Capital Markets…But Securities Expert Warns Investors: "Seek Quality Advice Before Jumping In"

TORONTO, Jan. 11, 2016 /CNW/ - In just two days, January 13^th, investors in Ontario will be able to capitalize on wide-reaching changes to financial legislation, opening up private capital investment opportunities that were once available only for high-net worth investors. 

"It's going to create greater capital access from a larger pool of investors," says Jim Boyle, a securities lawyer based in Toronto. "For these new investors to the exempt market, it's important to note that there are many new opportunities but investors must know what's suitable for their investment goals."

The exempt market is attractive because of recent volatility in global stock markets, along with dropping oil prices and the plummeting Canadian dollar. Exempt market investments may not be as affected by the swings in the public markets. Boyle wants investors to understand that the nature of exempt market investments can be quite different from public securities. "Let's be clear: the exempt market is not a short-term fix to an ailing portfolio. The tradeoff is liquidity; you have to lock in, often for 3 to 5 years."

How do you know if it's a suitable investment?

The new OM exemption in Ontario, available for years outside the province, including BC and Alberta, is designed to facilitate access to investments if an offering memorandum (OM) is provided. Boyle notes, "While the OM provides robust investor protection measures, it is still wise for investors to seek quality advice, such as from an exempt market dealer, before making any new investment decisions to ensure the investment is suitable."

Before, only investors qualified as accredited investors were allowed to invest in the exempt market. Besides banks and pension funds, for instance, individuals had to be worth over $5 million, or have $1,000,000 of cash and securities, or earn over $200,000 per year ($300,000 with a spouse). Now, the new OSC rules allow anyone to invest up to $10,000 into the private capital markets annually. Those earning at least $75,000 individually, or $125,000 per household will be able to invest up to $100,000 annually, as long they've received advice from an exempt market dealer.

"The OSC moved cautiously when opening investments to the average person. With the new regime in Ontario, investors will receive better continuous disclosure with audited financial statements and an annual notice describing how proceeds were used," says Boyle.

Existing RRSPs are also eligible.

Individuals will be able to move their existing RRSP contributions to exempt market investments. While typical investments such as stocks, bonds and mutual funds are easily cashable; most people view their RRSPs as a locked-in investment. As mentioned above, an investment in the exempt market may be tied up, often for 3 to 5 years, but for RRSP holders that's not a long time horizon. While the exempt market is not as liquid as public ones, there are many opportunities for higher rates of returns. "Though less liquid, exempt market investments can be less volatile. These investments are made to be held, not traded." Mr. Boyle adds.

About Jim Boyle

Jim Boyle is the founding partner of Boyle & Co. LLP, where he practices exclusively in the areas of securities law. Jim was a founder and principal architect of the Canadian Securities Exchange, a Canadian stock exchange, designing both the regulatory and market models. He also designed and implemented Canada's first Internet prospectus offering, recognized by the Financial Post as one of the ten most innovative deals of 1999. www.boyleco.com

Jim Boyle is available for interviews to offer expertise on the legislation changes and the new investment opportunity.

SOURCE Liquid Communications

For Interviews, Media Contact: Irit Shtock, Liquid Communications, [email protected], O 416-777-2899, C 416-565-2519