The content in this post is for educational purposes only and does not constitute financial, investment, tax, or legal advice
Hi folks! Today let’s learn about Canada’s National Instrument 45-106 which allows Canadian companies to raise investment capital without filing a full prospectus, provided they sell only to investors meeting specific criteria. The most common criteria is only selling to accredited investors, generally those earning over $200,000 annually or holding more than $1 million in financial assets. It applies across all provinces, administered by each province’s own securities regulator. NI 45-106 came into force in Canada on September 14, 2005 and applies to any private capital pool in Canada, not just Mortgage Investment Corporations.
The Exempt Market
Under National Instrument 45-106, companies can raise money without filing a prospectus provided they meet specific exemptions. The logic is that sophisticated institutions and wealthy individuals can evaluate risk on their own. But can they?
The Accredited Investor Lie
The most widely used exemption limits private placements to people earning over $200,000 per year or holding net financial assets above $1 million. In practice it has become a license to sell almost anything to anyone who clears that threshold. A retired school teacher who paid off her house qualifies as an accredited investor although she may have no ability whatsoever to evaluate a leveraged private mortgage fund or a crypto yield account operated offshore.
Crypto
Crypto investments can be raised under NI 45-106 exemptions in Canada, primarily through the accredited investor and offering memorandum exemptions. In 2021 the CSA published Staff Notice 21-329, clarifying that custodial crypto platforms permit crypto funds and structured investment products sold to qualifying investors with proper dealer registration in place. Not permitted are platforms offering custodial crypto accounts, yield-generating products, or leveraged crypto trading without full dealer registration, regardless of whether they invoke a prospectus exemption. The exemption covers how capital is raised, not how the platform operates, and Canadian regulators have made it clear that one does not substitute for the other.
A Warning
The Bridging Finance collapse of 2021 is the starkest recent example. Bridging raised hundreds of millions from accredited investors before the OSC placed it into receivership, with investigators alleging fraud, conflicts of interest, and self-dealing by its principals. Many victims were retirees assured they were in a conservatively managed fund. The red flags existed long before regulators acted.
Disclosure Failure
Another exemption allows issuers to raise from a broader investor pool by providing an Offering Memorandum. In practice, these OMs may have been used to raise capital for speculative ventures while describing investments in language that obscures the real risk. Ontario’s regulator has spent years trying to tighten these rules, which itself signals how inadequate the original framework was.
It Happens In The USA Too
In the United States, Regulation D operates on nearly identical principles. The GPB Capital Holdings case saw over $1.8 billion raised from retail investors before the SEC alleged it was a Ponzi scheme. Canadians seeing ads for fully managed crypto accounts should know those pitches often invoke similar regulatory language to suggest legitimacy where very little may exist.
What To Ask Before You Invest
If a promoter mentions a prospectus exemption, slow down. Verify the issuer’s registration through your provincial securities regulator. Ask for the Offering Memorandum and have an independent and accredited advisor review it. Ask where your money is held and whether a third-party custodian is involved as well as their fee(s). A legitimate offering answers all of these questions without hesitation.
Enforcement Failure
The failures in Canada’s exempt market are not found in the rules themselves but in how slowly regulators respond when abuse becomes visible. Bridging Finance did not collapse overnight. The syndicated mortgage scandals in Ontario did not emerge from nowhere. In both cases, enforcement moved slowly while investors kept pouring money into already-compromised vehicles. Until that changes, the gap between what the rules promise and what investors experience will remain dangerously wide.
Forty-six percent of Canadians now report seeing investment opportunities promoted on social media. The CSA, the RCMP, and the Canadian Anti-Fraud Centre issued a joint public warning as recently as March 2025. The contraventions are accelerating.
Canadians lost $645 million to fraud in 2024 — nearly triple what was lost in 2020. Over 4,000 investment fraud cases were reported to the Canadian Anti-Fraud Centre that same year, and regulators estimate that 90 to 95% of fraud goes unreported entirely.
DGB
Usefull Links:
Gig Worker or Self Employed Needs This
