Self-Certified Investors 

Are you interested in investing in Ontario startups but don’t meet the Accredited Investor financial threshold? Then, consider the new securities regulation exemptions that could allow you to participate in these investments. Known as the Self-Certified Investor Prospectus Exemption (“SCI”), it’s issued by the Ontario Securities Commission (“OSC”).  

Under general securities regulations, without being an Accredited Investor, a retail investor could only invest in private companies that had issued a full Prospectus with the OSC or, if the company was at a very early stage, called a Private Issuer. Angel Investors, typically Accredited Investors, have been active investors in these private companies.  

The OSC defines accredited investors as individuals who have earned $200,000 in income in the most recent two years, $300,000 when combined with a spouse, or net realizable assets, pre-tax, of $5 million.  

To facilitate capital formation for Ontario’s innovation and growth, the OSC created this new trial category for individuals who possess specific professional certifications. Those individuals can invest a maximum of $30,000 per calendar year as if they were Accredited Investors. As the OSC also has a mandate for investor protection, they have qualified professionals with credentials such as Chartered Financial Analyst (“CFA”), Canadian Securities Course, CPAs, lawyers specializing in financial areas, and those holding undergraduate degrees in Commerce with a finance designation. The complete list on the OSC site includes other qualifications, such as CIM, MBA Finance/Investments, CIFC Exam, Series 7 USA, CFP, Financial Planner or Financial Advisor qualification.  

The OSC has also created a category that includes subject-matter experts, opening avenues for individuals with deep expertise in specific fields to invest in companies aligned with their expertise. The OSC describes this person as having management, policy making, engineering, product, and other operating experience in the same sector as the considered investment.  

A SCI Angel investor does not need to join an Angel Group to use the exemption. Still, the Not-For-Profit Angel Groups under the umbrella of Angel Investors Ontario are at different stages of assimilating SCIs into angel groups during this extended initial trial period. The groups are looking at strategies to employ, educate, and promote adoption and highlight the benefits of having SCIs within their groups. Check out the AIO website at www.angelinvestorsontario.ca for your local angel group contacts.  

AIO embraces the SCI Angel opportunity as a means to attract new, particularly younger, Angels and Subject-Matter experts who can contribute their expertise during the due diligence process. Including a younger cohort of SCI Angels may provide additional technical insight and comfort during due diligence processes, especially in cases where no single angel has volunteered to manage the deep dive into due diligence.  

SCI investors will need to complete a Risk Acknowledgement Form and a Self-Certification Form that the startup’s lawyer should have prepared when investing.  

As mentioned, education and best practices in Angel Investing are part of the benefits of joining an Angel group, and that includes discussions about the importance of portfolio diversification and being comfortable with the amount of risk capital they wish to deploy in total and into any particular investment. Many Angels like to keep some funding powder dry to have it ready to invest in a previously invested company. General guidance to new SCI investors is not to invest the total $30,000 into just one opportunity, so finding entrepreneurs willing to accommodate SCI investors with appropriate minimum investment amounts is crucial. Some further advanced startup investment rounds may require a minimum investment cheque size greater than $30,000.  

By embracing SCI Angels, we can attract additional early-stage investors into our ecosystem, fostering growth and diversity within our investment community in Ontario.

For more information visit OSC!