OSC delivers for advisors

OSC delivers for advisors

OSC delivers for advisors The regulator’s corporate finance branch brought out its 2014-2015 annual report this week. The highlight for advisors has to be the changes being implemented in the exempt markets that will allow more of your clients to invest in private capital in Ontario.

“Ultimately, there’s going to be a retail marketplace in Ontario,” said Craig Skauge, president of the National Exempt Market Association. “As of today functionally only 1% of the Ontario population can invest in the exempt market, those being accredited investors. As of the fall that will change to 100 per cent of the population provided you’re given an OM.”

Two years in the making, those earning at least $75,000 individually or $125,000 for a household (“eligible investors”) will soon be able to invest up to $100,000 annually in private capital investments. To qualify for the $100,000 maximum, investors must receive advice from a portfolio manager, investment dealer or exempt market dealer and also meet suitability requirements.

Those meeting the financial qualifications ($400,000 net worth is also a qualifier for those not meeting income levels) but not meeting the advice and suitability requirements can invest up to $30,000 annually. Those individuals who aren’t eligible investors can invest a maximum of $10,000 annually. Combined together this encompasses the entire
Ontario population.

The move provides advisors, investors and firms seeking capital far greater opportunity.

A total of $45 billion in non-investment fund capital was raised in Ontario in 2013 through prospectus-exempt distributions. Ninety per cent of this capital raised was done through the accredited investor prospectus.

The OM prospectus exemption will deliver a huge boost to the $45 billion figure both in Ontario and elsewhere as several other provinces are expected to harmonize with the OSC’s rules.

“I think it’s big in that they’re [advisors] now going to be able to not just talk to their clients about alternative investments,” said Skauge, “but actually be able to offer them alternative investments regardless of the client’s financial status.”

Interestingly, Skauge praises the OSC’s move suggesting the investment maximums introduced provide some balance for investors.

“On the numbers I think the OSC’s come up with a unique framework that respects the financial wherewithal of different types of clients in an effort to ensure that no one client is overexposed in alternatives at any given time,” Skauge said.

“This new model is going to create a regime of accountability not unlike the public markets where some ongoing disclosure will be provided to investors regardless of the fact that the issuer is not listed.”