Resources for businesses

Identification

Before an investor signs a subscription agreement, the business should collect documents to enable the business to confirm the identity of the investor.  

The business will provide investors with a subscription agreement to be completed and signed. Generally, the investor will also transfer money to the business or the business’ lawyer at this time. If the business is using a dealer the investor will transfer the money to the dealer to be held in escrow until the closing of the transaction. 

Accredited investor documents

Before or at the time an accredited investor signs the subscription agreement, the business must collect a completed Form 45-106F9 Form for Individual Accredited Investors.  

A business relying on the accredited investor exemption may also have to collect documentation from investors to verify their status as accredited investors. 

If the business is working with a dealer, the dealer will collect this documentation from investors on its behalf. 

Self-certified investor documents

Before or at the time an investor signs the subscription agreement, the business must collect a completed Confirmation of Qualifying Criteria form and Acknowledgement of Risks form from self-certified investors. 

If the business is working with a dealer, the dealer will collect this documentation from investors on its behalf. 

See also, Is a confirmation of an investor’s status required?

Accredited Investor

A business raising capital under the Accredited Iinvestor Prospectus Exemption must confirm an investor’s status as an accredited investor before the investor purchases securities. To confirm investor status, a business must take “reasonable steps” to verify that an investor is an Accredited Investor as indicated on Form 45-106F9 Form for Individual Accredited Investors.

A business is responsible for determining whether the terms and conditions of the Accredited Investor Prospectus Exemption are met and should retain all necessary documents to demonstrate that they properly relied on the exemption. It would not be sufficient for a business to rely solely on a document that only states, “I am an accredited investor.” Similarly, it would not be acceptable if the business accepts only an initial beside a category on the Form 45-106F9 without taking additional steps to confirm that the purchaser was truthful in making the representation. 

Whether the steps taken to verify an investor’s status are reasonable will depend on the particular facts and circumstances of the investor and the offering including, but not limited to: 

• how the business identified or located the potential investor.
• what category of Accredited Investor the investor claims to meet.
• what type of relationship the investor claims to have and with which director, executive officer, founder, or control person of the business/issuer.
• how much and what type of background information is known about the investor, and 
• whether the person who meets with, or provides information to, the investor is registered. 

Generally, we expect that a business would ask questions about the investor’s net income, financial assets or net assets, or other questions designed to elicit details about the investor’s financial circumstances. If there are concerns about the investor’s responses, further inquiries should be made, and if there are still questions about the investor’s eligibility, the business could ask to see documentation that independently confirms the purchaser’s financial circumstances.  

If a dealer is used to help raise capital, they may take steps to verify that an investor is an accredited investor on behalf of the business. 

If the business is uncertain as to whether a potential investor is an accredited investor, the business should not sell its securities to that investor. For dditional guidance on “reasonable steps” see Companion Policy 45-106CP Prospectus Exemptions.

Self-certified investor

A business does not need to confirm a self-certified investor’s status, but it must obtain: 

1. A completed Confirmation of Qualifying Criteria form, confirming that the investor meets the qualifying criteria, and  
2. A completed Acknowledgement of Risks form, confirming that the investor has read and understood each of the acknowledgements. 

The business must also obtain a representation in the subscription agreement from the self-certified investor that after giving effect to the sale of securities, the aggregate acquisition cost of all securities of all issuers acquired by the investor under the self-certified prospectus exemption for the calendar year does not exceed $30,000. 

To rely on the self-certified investor prospectus exemption, the business must not know and would not reasonably be expected to know that the statements made by the self-certified investor in the Confirmation of Qualifying Criteria, the Acknowledgement of Risks or the subscription agreement representation noted above are false.

Generally, closing the transaction means that the business and the investor have satisfied the terms and conditions of the subscription agreement (i.e., the agreement for the investor to purchase securities issued by the business). The investor will transfer money to the business, or if the investor has transferred money to the business’ lawyer or the dealer to be held in escrow, then the lawyer or dealer will transfer the money to the business and the securities will be issued to the investor.

As part of closing the transaction the business may also have other requirements that they must satisfy, for example requirements under the Business Corporations Act (Ontario).