Accredited and Eligible Investor Rules in Canada (Including Ontario Considerations)
Key Takeaways
- Accredited and eligible investors may gain access to private investments that are not available to the general public.
- Accredited investors must meet higher income or asset thresholds than eligible investors.
- The rules governing exempt market investing in Canada are primarily established under National Instrument 45-106 – Prospectus Exemptions (NI 45-106).
- In Ontario, exempt market investments are overseen by the Ontario Securities Commission (OSC).
- Investors purchasing private securities are generally required to complete eligibility and risk acknowledgement documentation before investing.
- Private alternative investments can provide diversification, income potential, inflation protection, and access to sectors not typically available in public markets.
The private investment space in Canada is a dynamic market that can offer attractive and differentiated investment opportunities. Unlike public markets, however, access to many private investments is limited to investors who meet specific regulatory requirements.
You may have heard terms such as “accredited investor” or “eligible investor” — but what do they actually mean, and why do they matter?
Participation in most private offerings within Canada’s exempt market is governed by eligibility criteria established by Canadian securities regulators. These rules are designed to help ensure investors have the financial capacity, investment knowledge, or professional guidance appropriate for higher-risk and less-liquid investments.
For Ontario residents, exempt market activity falls under both NI 45-106 and the oversight of the OSC. While the rules are broadly harmonized across Canada, Ontario investors should understand that certain exemptions, forms, suitability obligations, and dealer registration requirements may differ slightly from those in other provinces.
This guide is designed to help investors better understand accredited and eligible investor classifications and how they relate to accessing private alternative investments.
What Is the Exempt Market?
In Canada, the exempt market provides access to private investment opportunities offered outside the traditional prospectus system used for publicly traded securities.
These investments may include:
- Private equity funds
- Private credit strategies
- Real estate and mortgage investment funds
- Infrastructure investments
- Venture capital opportunities
- Hedge funds and alternative strategies
Because these offerings are exempt from many of the disclosure requirements associated with public securities, investors are expected to either meet higher financial thresholds or receive professional investment advice before participating.
Private investments are generally considered:
- Less liquid than publicly traded investments
- Longer-term in nature
- More complex structurally
- Higher risk, but with the potential for enhanced returns and diversification benefits
How Does an Investor Qualify as an Accredited Investor in Canada?
For investors who qualify, accredited investor status provides access to a broader range of exempt market investments without investment limits.
Under NI 45-106, accredited investors are individuals or entities who meet at least one of the following criteria:
Individual Accredited Investor Criteria
Income Test
Earned more than $200,000 individually before taxes in each of the two most recent calendar years, and reasonably expects to maintain that income level in the current year; or earned more than $300,000 combined with a spouse in each of the two most recent calendar years.
Financial Asset Test
Owns financial assets with an aggregate realizable value exceeding $1,000,000 before taxes, net of related liabilities.
Financial assets generally include:
- Cash
- Stocks and bonds
- Mutual funds and ETFs
- GICs and investment accounts
Primary residences and other real estate holdings are generally excluded unless held through qualifying financial structures.
Net Asset Test
Has net assets of at least $5,000,000, either alone or together with a spouse.
Professional Registration Test
Is currently registered under Canadian securities legislation as an adviser or dealer representative.
Entity Accredited Investor Criteria
- Entities with net assets of at least $5,000,000
- Entities wholly owned or controlled by accredited investors
In Ontario, investors are typically required to complete:
- An accredited investor certificate or schedule
- Subscription documentation
- Risk acknowledgement forms where applicable
Securities dealers and portfolio managers registered in Ontario have a regulatory obligation to assess investment suitability, even where an investor qualifies as accredited.
What Are Eligible Investor Qualifications in Canada?
An eligible investor is another category established under NI 45-106 that allows investors to participate in certain exempt market offerings, typically through the Offering Memorandum (OM) exemption.
Eligible investors generally have lower qualification thresholds than accredited investors but may face investment limits unless they receive suitability advice from a registered advisor.
You may qualify as an eligible investor if you meet one of the following criteria:
Income-Based Qualification
Individual net income exceeding $75,000, or combined $125,000 with a spouse, in each of the two most recent calendar years with expectation to continue.
Net Asset Qualification
Net assets of at least $400,000, individually or with a spouse.
Suitability Advice Qualification
Receives advice from a registered investment professional confirming suitability.
Comparison of Accredited and Eligible Investors
| Feature | Accredited Investor | Eligible Investor |
|---|---|---|
| Qualification | Higher income or asset thresholds | Lower income or asset thresholds |
| Access to Investments | Broad access to exempt market offerings | Access primarily through OM exemption |
| Annual Investment Limits | Generally no limit | Typically $30,000 annually, or up to $100,000 with suitability advice |
| Required Documentation | Subscription agreement and investor certificate | Offering Memorandum and risk acknowledgement |
| Regulatory Protections | Suitability obligations may still apply | Greater disclosure requirements under OM exemption |
Offering Memorandum Requirements for Eligible Investors
If you invest under the Offering Memorandum exemption, Canadian securities regulations generally require that you receive and review an Offering Memorandum (OM).
An OM provides detailed information regarding:
- The investment strategy
- Key risks
- Fees and expenses
- Liquidity and redemption restrictions
- Financial statements
- Management background
- Conflicts of interest
For Ontario investors, additional risk acknowledgement forms confirm understanding of:
- Potential loss of capital
- Illiquidity
- Lack of public market pricing
- Long investment horizons
An OM is a disclosure document and informational resource — it is not a guarantee of performance or protection against loss.
Why Accredited and Eligible Investors Choose Private Alternative Investments
- Diversification Beyond Public Markets: May help reduce portfolio volatility.
- Access to Unique Opportunities: Exposure to private businesses, real estate, infrastructure, and more.
- Potential for Enhanced Returns: Certain strategies aim for higher long-term returns.
- Income Generation: Some investments provide regular income streams.
- Inflation Protection: Real assets may help preserve purchasing power.
- Lower Correlation: May provide stability during market volatility.
- Estate and Wealth Planning: Useful for long-term wealth strategies.
- Access to Institutional Strategies: Exposure to professional management.
Important Considerations and Risks
- Illiquidity
- Limited transparency
- Valuation complexity
- Leverage risk
- Manager risk
- Potential loss of capital
Investors should carefully review all offering documents and consult with qualified legal, tax, and financial professionals before investing.
Working with a skilled financial advisor or portfolio manager can help assess whether private alternatives align with financial goals, liquidity needs, and risk tolerance.