The exempt market
The exempt market describes a section of Canada’s capital markets where securities can be sold without the protections associated with a prospectus. The general rule under Ontario securities law is that any security that will be offered to the public must be offered under a prospectus.
The exempt market allows securities to be offered under what are called prospectus exemptions. Prospectus exemptions can help a company or fund raise money without the time and expense of preparing a prospectus. Prospectus exemptions are available for both Canadian and foreign companies and hedge or pooled funds.
Ontario’s Securities Act and National Instrument 45-106 Prospectus Exemptions (NI 45-106) form the regulatory basis for the exempt market.
Certain prospectus exemptions can be used to sell securities like debt, equity, asset-backed securities, investment funds, and derivatives in the exempt market.
Typically, individuals, firms, and online portals that sell securities on the exempt market need to register as dealers or portfolio managers (also known as “registrants”). Although there is no general requirement for companies or funds to distribute securities through a registrant, in many cases this will be necessary to sell securities in the exempt market.
When securities are sold without a prospectus, certain protections do not apply, such as the right to sue for damages in the event of a misrepresentation — although some exempt distributions may be made on the basis of some form of offering document which may attract liability under section 130.1 of Ontario’s Securities Act.
In many cases, a security sold under a prospectus exemption can only be resold if certain conditions are met. These resale conditions are designed to ensure that there is sufficient disclosure available in the marketplace to allow a subsequent purchaser to make an informed investment decision. For more information on resale restrictions, see National Instrument 45-102 Resale of Securities.
Ontario Securities Commission (OSC) staff prepared the Summary of Key Capital Raising Prospectus Exemptions in Ontario to provide an overview of exempt market offerings. The summary is not exhaustive.
The OSC is testing a set of initiatives designed to support early-stage capital raising for Ontario business through OSC TestLab.
Exempt distributions summary
Exempt distribution information has been summarized from Reports of Exempt Distribution (Form 45-106F1) that have been filed with the OSC under National Instrument 45-106 Prospectus Exemptions. The summary is based on information contained in Reports where Ontario purchasers have been identified.
Ontario Exempt Market Dashboard
An overview of prospectus-exempt distributions by Canadian corporate issuers that raised capital from Ontario investors can be found by visiting the Ontario Exempt Market Dashboard.
Filing requirements for exempt distributions
Reporting requirements
Companies, funds, and underwriters must report certain exempt distributions to the OSC by:
Additional information can be found on the report of exempt distribution page.
Offering materials and ongoing disclosure documents
In addition to filing Form 45-106F1, companies that distribute securities using certain prospectus exemptions are required to provide offering materials or ongoing disclosure documents, or both, with the OSC.
Point of sale disclosure
- offering memorandum exemption (section 2.9 of NI 45-106)
- listed issuer financing exemption (Part 5A of NI 45-106)
- crowdfunding exemption (MI 45-108)
- start-up crowdfunding exemption (NI 45-110)
- government incentive security exemption (section 73.5 of Ontario’s Securities Act)
- offering memoranda that are voluntarily provided (section 5.4 of OSC Rule 45-501)
Ongoing disclosure
- offering memorandum exemption (section 2.9 of NI 45-106)
- crowdfunding exemption (MI 45-108)
Financial statements
Companies that distribute securities under the offering memorandum prospectus exemption (section 2.9 of NI 45-106) must, within 120 days after the end of each of its financial years, deliver annual audited financial statements to the OSC and make them reasonably available to each holder of a security acquired under the offering memorandum exemption. At the same time, a 45-106F16 Notice of Use of Proceeds must also be delivered to the OSC and made reasonably available to each holder of a security acquired under the offering memorandum exemption.
Related instruments and policies
Most prospectus exemptions available to companies and funds are outlined in National Instrument 45-106 Prospectus Exemptions. Generally speaking, each exemption is premised on a specific policy rationale in different circumstances. For other rules and regulations, refer to:
- OSC Rule 45-501 Ontario Prospectus and Registration Exemptions
- National Instrument 45-110 Start-up Crowdfunding Registration and Prospectus Exemptions
- Multilateral Instrument 45-108 Crowdfunding
- Ontario Instrument 45-507 Self-Certified Investor Prospectus Exemption (Ontario Class Order)
- History of 45-106 Prospectus Exemptions
- History of 45-501 Ontario Prospectus and Registration Exemptions
- History of 45-108 Crowdfunding
Related publications
- May 9, 2024 - Ontario Instrument 45-509 Report of Distributions Under the Self-Certified Investor Prospectus Exemption (Interim Class Order)
- July 20, 2023 - Coordinated Blanket Order 13-933 Temporary exemption from the requirement to transmit a report of exempt distribution through SEDAR+ in connection with distributions of eligible foreign securities to permitted clients
- June 9, 2023 - CSA Staff Notice 45-308 (Revised) Guidance for Preparing and Filing Reports of Exempt Distribution under National Instrument 45-106 Prospectus Exemptions
- December 7, 2022 - OSC Staff Notice 45-718 Ontario’s Exempt Market
- December 10, 2020 - OSC Staff Notice 45-717 Ontario’s Exempt Market
- February 7, 2019 - CSA Staff Notice 45-325 Filing Requirement and Fee Payable for Exempt Distributions involving Fully Managed Accounts
- November 29, 2018 - OSC Staff notice 45-716 2018 Ontario Exempt Market Report
- July 19, 2018 - CSA Notice of Amendments to National Instrument 45-106 Prospectus Exemptions and Change to Companion Policy 45-106CP Prospectus Exemptions relating to Reports of Exempt Distribution
- June 15, 2017 - OSC Staff Notice 45-715 2017 Ontario Exempt Market Report
- June 8, 2017 - CSA Multilateral Notice and Request for Comment - Proposed Amendments to National Instrument 45-106 Prospectus Exemptions relating to Reports of Exempt Distribution
- July 7, 2016 - CSA Staff Notice 45-320 Exemptions for Certain Foreign Issuers from the Requirement to Identify Purchasers as Registrants or Insiders in Reports of Exempt Distribution
- April 7, 2016 - CSA Notice of Amendments to National Instrument 45-106 Prospectus Exemptions relating to Reports of Exempt Distribution
- December 8, 2022 - CSA Notice of Amendments to National Instrument 45-106 Prospectus Exemptions and Changes to Companion Policy 45-106CP Prospectus Exemptions Relating to the Offering Memorandum Prospectus Exemption
- October 25, 2022 - Ontario Instrument 45-507 Self-Certified Investor Prospectus Exemption (Ontario Class Order)
- September 8, 2022 - CSA Notice of Amendments to National Instrument 45-106 Prospectus Exemptions to Introduce the Listed Issuer Financing Exemption
- June 23, 2021 - CSA Notice of Publication of National Instrument 45-110 Start-up Crowdfunding Registration and Prospectus Exemptions
- January 28, 2016 - Summary of Key Capital Raising Prospectus Exemptions in Ontario
- November 5, 2015 - CSA Notice of Publication of Multilateral Instrument 45-108 Crowdfunding
- October 29, 2015 - Multilateral CSA Notice of Amendments to National Instrument 45-106 Prospectus Exemptions Relating to the Offering Memorandum Exemption
- September 24, 2015 - CSA Notice of Amendments Relating to Rights Offerings to National Instrument 45-106 Prospectus Exemptions, National Instrument 41-101 General Prospectus Requirements, National Instrument 44-101 Short Form Prospectus Distributions and National Instrument 45-102 Resale of Securities and Repeal of National Instrument 45-101 Rights Offerings
- February 19, 2015 - Notice of Amendments to National Instrument 45-106 Prospectus and Registration Exemptions Relating to the Accredited Investor and Minimum Amount Investment Prospectus Exemptions
- April 30, 2015 - Notice of Amendments to National Instrument 45-106 Prospectus and Registration Exemptions Relating to the Family, Friends and Business Associates Exemption
- November 27, 2014 - Notice of Amendments to Ontario Securities Commission Rule 45-501 Ontario Prospectus and Registration Exemptions relating to the Existing Security Holder Prospectus Exemption
- November 5, 2015 - Backgrounder – Exempt Market Review (Updated)
- March 20, 2014 - OSC Notice and Request for Comment – Introduction of Proposed Prospectus Exemptions and Proposed Reports of Exempt Distribution in Ontario
- August 28, 2013 - OSC Notice 45-712 Progress Report on Review of Prospectus Exemptions to Facilitate Capital Raising
- December 14, 2012 - OSC Staff Consultation Paper 45-710 Considerations for New Capital Raising Prospectus Exemptions
- June 7, 2012 - OSC Staff Notice 45-707 OSC Broadening Scope of Review of Prospectus Exemptions
- November 10, 2011 - CSA Consultation Note 45-401 Review of Minimum Amount and Accredited Investor Exemptions