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What is the exempt market?

Securities law contains two fundamental requirements when considering the introduction of securities to market:

The prospectus requirement

Issuers are required to file a prospectus in order to sell or distribute securities to the general public. This requirement is to ensure that investors are provided with relevant information about the company so that the investor can make an informed decision regarding their investment options. Securities offered by way of prospectus provide investors with certain statutory rights in the case of a misrepresentation in a prospectus, including the right to sue for damages.

The registration requirement

All parties involved in the business of trading or advising in securities are required to register with their respective regional securities regulating bodies. This ensures that entities who deal in securities are suitable candidates that meet the requirements for proficiency, integrity and solvency. The registration requirement also asks, among other things, that registrants comply with certain KYP (know your product), KYC (know your client), and suitability requirements.

An exempt security is a security that is distributed under an exemption from the prospectus requirement as discussed above. Securities that are offered for sale under an exemption from prospectus requirements are usually called private placements. The market in which exempt securities are traded is known as the exempt market or private market.

Types of exemptions

Where an issuer decides to distribute securities in the exempt market they can utilize some of the commonly used prospectus exemptions below:


Accredited Investor exemption.


Minimum Amount exemption or the $150,000 exemption.


Offering Memorandum exemption.

Private Issuer

Exemption for issuers with less than 50 shareholders.


Family, Friends and Business Associates exemption.

Secondary market

There are secondary markets for publicly listed companies such as stock exchanges. However, note that there is no secondary market for exempt securities. Securities of private issuers purchased through an exemption are generally considered less liquid and can only be redeemed to the issuer.

Roles in the exempt market

Exempt Market Issuers

Corporations that raise capital through the exempt market.

Exempt Market Dealers (EMDs)

Registered firms who sell exempt securities to investors.

Dealing Representatives (DR)

Individual registrants who sell exempt securities via their EMD.

Securities Commissions

Provincial oversight over the issuer, EMD, DR.

Exempt Market Investor

Individuals and institutions who purchase exempt securities.