Accredited Investor (Canada)

Under section 53 of Ontario's Securities Act, no one may distribute a security unless a prospectus has been filed and receipted. A distribution includes a company issuing new shares, SAFEs or convertible notes. Private companies raise money under exemptions instead, and the accredited investor exemption is the most widely used. It applies when the purchaser buys as principal, meaning for its own account, and meets the definition of accredited investor. There is no cap on the amount invested and no disclosure document is required.

Ontario splits the rule between the Act and a national instrument. Section 73.3 of the Securities Act contains the exemption itself and lists institutional investors such as banks, governments, registered dealers and advisers and regulated pension funds. National Instrument 45-106 Prospectus Exemptions (NI 45-106) supplies the rest of the definition in section 1.1, including the tests for individuals and companies, and the conditions in section 2.3. The other provinces and territories use section 2.3 of NI 45-106 directly, so the tests below work across Canada.

The definition is a bright-line test. Someone who falls a dollar short does not qualify. A person who is not accredited may still be able to invest under another exemption, such as the private issuer exemption.

Ontario also has a temporary self-certified investor exemption, Ontario Instrument 45-510, which took effect on October 25, 2025 and expires on April 25, 2027 unless the OSC extends it. It replaced Ontario Instrument 45-507, the first version of the exemption, which the OSC issued on October 25, 2022. It lets issuers with a head office in Canada, other than investment funds, sell to individuals who certify that they meet at least one listed experience, education, professional designation or examination criterion, up to $50,000 per investor per calendar year, counting purchases under both instruments. Since December 4, 2025, a private issuer can also sell to a self-certified investor without losing its private issuer status. A harmonized version for Ontario and most other provinces and territories (not British Columbia or Québec), proposed Multilateral Instrument 45-111, was published for comment on September 25, 2025 and was not in force as of October 2026.

NI 45-106 gives individuals four financial routes. Each one is measured at the time of the investment; the issuer does not have to monitor the investor's status afterwards.

If a couple's combined income does not exceed $300,000 but one spouse alone earns more than $200,000, only that spouse qualifies. "Spouse" covers a married partner who is not living separate and apart and a person in a marriage-like relationship.

Some individuals qualify by role rather than wealth: dealing and advising representatives registered under Canadian securities law, and most individuals who were formerly registered.

The two asset tests measure different things.

Financial assets are cash, securities, and insurance contracts, deposits or evidence of deposits that are not themselves securities. Real estate owned directly is not a financial asset, so the value of a home does not count toward the $1,000,000 or $5,000,000 financial asset tests. Related liabilities must be subtracted: debts incurred to buy or hold financial assets, such as a margin or investment loan, and debts secured by financial assets. The assets must be beneficially owned. The Companion Policy to NI 45-106 treats securities in a self-directed RRSP as the holder's, counts a spousal RRSP for the $1,000,000 test but not the $5,000,000 test, and excludes a group RRSP the individual cannot deal with directly.

Net assets are total assets minus total liabilities. Here the home counts at a reasonable estimate of fair value, and the mortgage counts as a liability, along with any income tax owing at the time of the investment.

A couple with a $3,000,000 house, a $900,000 mortgage and $700,000 in investments meets neither financial asset test. Their net assets are $2,800,000, so they also fail the net asset test.

A company, partnership or trust that is not an investment fund qualifies if it has net assets of at least $5,000,000 as shown on its most recently prepared financial statements. That route is not available to an entity created or used solely to purchase or hold securities as an accredited investor, so a shell funded the week before a closing does not work.

Other routes are common in private financings:

• Look-through entities. An entity is accredited if all of its owners, direct, indirect or beneficial, are accredited investors.
• Family trusts. A trust established by an accredited investor qualifies if a majority of its trustees are accredited investors and all of its beneficiaries are the investor's spouse, former spouse or listed relatives.
• Institutions and funds. Financial institutions, governments, regulated pension funds, registered advisers acting for fully managed accounts and investment funds that meet the instrument's conditions.
• Registered charities that obtain advice on the securities being bought from an eligibility adviser or a registered adviser.

An individual who qualifies under the $1,000,000 financial asset, income or net asset test must sign a risk acknowledgement in Form 45-106F9 at the same time as, or before, signing the purchase agreement. The investor initials statements that they could lose the entire investment, may be unable to resell, may receive little information and will not get suitability advice from an unregistered salesperson, and initials the category they meet. The issuer keeps the signed form for 8 years. Individuals who meet the $5,000,000 financial asset test, and all non-individual investors, do not sign it.

The issuer, not the investor, is responsible for confirming status. The Companion Policy says a standard representation in a subscription agreement or an initial on Form 45-106F9 is not enough on its own. The seller should ask about the investor's income or assets, request supporting documents if anything is unclear, and keep a record of the steps taken.

Within 10 days after the distribution, the issuer must file a report of exempt distribution on Form 45-106F1; in Ontario it is filed through SEDAR+ with the OSC's filing fee. The securities are then subject to resale restrictions, so an investor in a private company can generally resell only under another exemption.

Our guide to SAFEs and convertible notes in Canada applies these exemptions to early-stage rounds, and our article on share structure for a new Ontario corporation explains the transfer restrictions that keep the private issuer route open. Lamba Law's startup financing practice prepares this paperwork.

Northvale Robotics Inc., a Mississauga startup run by Daniel Okafor, is raising $450,000 in preferred shares from three people.

Marcus Chen wants to invest $200,000. He holds $900,000 in a non-registered brokerage account, $450,000 in a self-directed RRSP and $80,000 in cash, but owes $300,000 on an investment loan he used to buy securities. Net of that loan his financial assets are $1,130,000, so he qualifies under the $1,000,000 test.

Farah Siddiqui wants to invest $150,000. She earned $180,000 before taxes in each of 2024 and 2025 and her spouse earned $150,000. Their combined $330,000 exceeds $300,000 in both years, and their 2026 income is on track, so she qualifies under the income test. She provides notices of assessment.

Elena Petrova wants to invest $100,000. Her house is worth $2,600,000 and her rental condo $900,000, with $1,200,000 of mortgages, plus $350,000 in investments. Her net assets are $2,650,000 and her income is $140,000, so she is not accredited. She has been a close personal friend of Daniel, a director, for 15 years. Northvale's articles have no share transfer restriction and the founders never signed a shareholder agreement, so it is not a private issuer. Elena invests under the family, friends and business associates exemption instead, with a Form 45-106F12 signed by her, by chief financial officer Grace Liu and by Daniel.

Marcus and Farah each sign Form 45-106F9 before their subscription agreements. Northvale closes, then files one Form 45-106F1 covering all three purchasers within 10 days.