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New exempt market rules take effect in Ontario with harmony across most of the country

The new Ontario rules will mean that exempt market products will now be brought to the average investor — though limits will be placed on the extent to which they can invest.

For years, investors in Ontario have suffered in relation to their counterparts in Western Canada for access to certain types of investments.

That will change Wednesday when a new set of rules governing access to private capital investment opportunities, the exempt market, comes into effect in the country’s largest province. Those rules have been developed after more than three years of discussion between the regulators and interested parties and also mean that investors across the country now face a similar set of rules.

All Ontario investors, irrespective of their income or net worth, will be able to participate in such investments that previously were the domain of high net worth individuals, meaning those who satisfied the accredited investor rule. That group of investors — about two per cent of the population — bought the investments via an offering memorandum, meaning without the protection of a prospectus.

Wednesday’s new rules are coming into effect after the regulators have “spent time making the exempt market more robust, establishing compliance regimes,” said Jim Boyle, a Toronto-based securities lawyer. Those steps, Boyle argues, have made the exempt market “a quality market.”

Even so, Boyle recommends that investors seek advice before making such investments. “The advice has to come from a portfolio manager, an IIROC-dealer, or an exempt-market dealer,” noted Boyle, who is something of a pioneer in the securities world. In 1999, for example, he was the leading force in the first direct offering of securities in Canada, a $400,000 financing for E-minerals.com.

Boyle, who has established an exempt-market dealer — originally named White Tooth Capital and soon to be rebranded as Wealth Creation Corp. — noted the investment products in question will be developed away from the exempt-market dealer but brought to the firm for its consideration.

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