• FAIR Canada Provides Commentary on the OSC's Proposed Offering Memorandum Exemption
  • February 3, 2014 | Author: Adria Leung Lim
  • Law Firm: Cassels Brock & Blackwell LLP - Toronto Office
  • The Canadian Foundation for Advancement of Investor Rights ("FAIR Canada") recently published an article relating to the new offering memorandum ("OM") exemption proposed by the OSC which will be published for public comment in the first quarter of 2014.

    Unlike all other Canadian provinces and territories, the OSC previously chose not to introduce the OM exemption because it considered the OM exemption too risky for retail investors. However, in an effort aimed to harmonize itself with the other provinces and to reduce inefficiencies and confusion in the market, the OSC is proposing that the OM exemption, which will be modelled after the Alberta regime, be available to purchasers satisfying certain eligibility criteria in order to invest more than $10,000.

    FAIR Canada questions the rationale behind the OSC’s proposal to implement the OM exemption, given that compliance with this exemption in other provinces has been found to be “woefully lacking” and retail investor fraud is regularly reported. In general, OMs are often poorly prepared and do not provide the necessary disclosure required, leading to widespread financial loss. FAIR Canada questions whether the OSC has adequate resources to oversee Ontario’s current exempt market, and suggests that the OSC should focus on improving compliance with the current exempt market requirements before proceeding with an OM exemption.