The Proposed Self-Certified Investor Exemption, and the Potential to Harmonize National Instrument 45-106
Overview
The Canadian Securities Administrators (“CSA”) released a consultation in September 2025, proposing Multilateral Instrument 45-111 (“MI 45-111”) to create a unified self-certified knowledge-based investor prospectus exemption across all Canadian jurisdictions except Quebec and British Columbia. The Proposed Instrument is designed to promote capital formation by providing a new source of capital for non-investment fund issuers with Canadian head offices.
The proposed harmonized exemption would replace the existing self-certified investor exemptions currently in Alberta, Saskatchewan, Ontario, and Manitoba, and apply uniformly across all Canadian provinces, with the exception of Quebec and British Columbia. Hopefully both those jurisdictions will join soon.
Background and Policy Objectives
This proposal builds on pilot projects tested by Alberta, Saskatchewan, Ontario, and Manitoba. Alberta and Saskatchewan led the way by adopting self-certified investor prospectus exemptions in 2021 while Ontario adopted a similar exemption in 2022. After an 18-month extension, the Ontario Securities Commission (“OSC”) introduced a new Ontario Interim Class Order (Ontario Instrument 45-510) in October 2025 to continue the exemption for another 18-month period through April 2027, hopefully bridging any gap until proposed MI 45-111 comes into force.
The exemption aligns with recommendations from Ontario’s Capital Markets Modernization Taskforce, which advocated for expanding investment opportunities to individuals with demonstrated financial or investment knowledge who may not meet traditional financial thresholds or accredited investor criteria. A few months after the Taskforce’s report, the Ontario government amended the OSC’s legislative mandate to explicitly include fostering competitive capital markets and capital formation alongside traditional investor protection objectives.
The shift from wealth-based to knowledge-based investor qualification signals a move away from the long-standing assumption that net worth or income equals sophistication, acknowledging that exempt market investment eligibility requirements should recognize that specialized credentials and education may be more predictive of a person’s ability to evaluate risk than wealth or income. The proposed self-certified exemption strategically targets experts and professionals who understand topics related to investing, such as finance, business, and law, but do not yet have the required wealth or income to be accredited investors, thereby broadening access to the exempt market.
Canada’s small and mid-sized issuers have long faced a funding gap between friends-and-family money and institutional capital; MI 45-111 may fill some of that gap. For early-stage issuers, this exemption effectively unlocks a new category of investors who historically could not participate despite being potentially more knowledgeable than many accredited investors.
The proposed qualification criteria are as follows:
1. Qualifying Employment History
5+ year operational (management, engineering, product) experience in issuer’s industry; OR
1+ year (in the past 5 years) in investment decision role at VC/ private equity or business investing in small/medium issuers; OR
Founder/Director (in the past 5 years) of an early-stage business that had annual revenues of at least $500,000 in its most recently completed financial year
2. Qualifying Degree
Practiced law in Canada for 24+ months (securities/ M&A advice); OR
MBA/Doctor/Master/PhD in finance/ economics; or undergrad in finance/business/commerce plus 3 years relevant experience; OR
Accredited degree directly relating to issuer’s industry + 3 years relevant experience
3. Qualifying Designation
CFA, CIM, CBV, CPA, CIWM, or CFP; OR
Financial Planner/ Advisor credential (in good standing) from FSRA or comparable body
4. Qualifying Examination
Passed:
Canadian Securities Course Exam or
Exempt Market Products Exam, or
Both of the Series 7 (US FINRA) & New Entrants Course Exam (CSI)
The existing Ontario and proposed multilateral exemptions are substantially similar, albeit with minor differences with regards to an explicit minimum duration for employment background. The most substantive difference is that the MI 45-111 annual aggregate investment cap is higher, at $50,000, compared to the $30,000 under Ontario Instrument 45-507 (“OI 45-507”). The OSC Test Lab Initiative received feedback that the annual investment limit of $30,000 under OI 45-507 was too low and the associated legal and compliance costs incurred by issuers was a disincentive. OI 45-507 restricts participation to issuers with head offices exclusively in Ontario, creating a localized capital market for Ontario-based businesses only.
Potential Consequences for National Instrument 45-106
In the September 2025 Notice, the CSA proposed “consequential amendments” to National Instrument NI 45-106 (“NI 45-106”) so that self-certified investors would be added to the list of purchasers who can purchase securities under the private issuer exemption in section 2.4. Currently, a private issuer can sell only to a limited list of permitted purchasers (e.g., directors, officers, close family, accredited investors, etc.) and still maintain its status as a “private issuer”. The CSA noted that some issuers are reluctant to use the self-certified exemption for fear of losing private issuer status; adding self-certified investors to the permitted purchaser list is meant to remove this disincentive. If this amendment is adopted, private issuers would be able to raise capital from self-certified investors with either MI 45-111, where applicable, or the private issuer exemption in NI 45-106 once amended, without risking the loss of their private issuer status.
A way forward to harmonize NI 45-106?
This progression from provincial pilot projects to a multilateral instrument and, hopefully soon a national instrument is a roadmap for more innovation to facilitate capital raising. The capital markets and Canada more generally need more innovative ideas that may originate in one or more jurisdictions, then proven with pilot projects, and subsequently harmonized across the country. Jurisdictions leading the way would effectively function as test labs, finding what works, which other jurisdictions can then adopt. At a time of national urgency to eliminate barriers to market efficiency and capital raising, regulators can take their cue from policymakers in other jurisdictions, including outside Canada, and then adopt best practices.
There is already meaningful “low hanging fruit” for harmonization. For years, Canadian jurisdictions have effectively run fragmented capital-raising experiments under NI 45-106, with each jurisdiction producing its own data set. By applying the same data-driven methodology used in evaluating the self-certified investor exemption, regulators could identify key risk indicators, such as patterns of client complaints to exempt firms, and review a few past years of already existing data to determine which NI 45-106 criteria have failed to deliver any real investor-protection benefit. These insights would provide the foundation to harmonize the national exempt-market regime in NI 45-106 in short order, at a time when that harmonization is sorely needed.
The authors are grateful for the support of Articling Student Vince Lee in the preparation of this publication.
About the Authors
Michael Holder (B.A. Western, LL.B. Windsor, MBA, Western) is the Managing Partner of North Star Legal, bringing more than 20 years of wealth management, legal, and compliance experience in Canada’s financial services sector. Having acted as Associate General Counsel and Chief Compliance Officer of Wealthsimple, Senior Legal Counsel at BMO Financial Group and a partner of one of Canada’s largest firms, Michael combines his practice and advisory work with teaching Fintech and Disruption of Banking at Ivey Business School.
Read Michael’s full bio here.
Martha Rafuse (B.A. Western University, LL.B. Osgoode, LL.M London School of Economics), Counsel at North Star Legal, brings more than two decades of securities regulatory experience across the financial industry, private practice, and government. Prior to joining North Star Legal, Martha led large compliance teams for both Canadian and U.S. firms, including RBC Phillips, Hager & North Investment Counsel Inc., RBC Dominion Securities Inc. (Retail), and Royal Mutual Funds Inc. As Legal Counsel at the Ontario Securities Commission, Martha developed legal solutions for novel regulatory issues and led significant policy initiatives.
Read Martha’s full bio here.