that the investment above $30,000 is suitable, in which case
the higher limit of $100,000 applies in all securities acquired
under the OM Exemption in the preceding 12 months.
This means that: (a) anyone can invest up to $10,000 under
the OM Exemption; (b) eligible investors may invest up to $30,000;
and (c) if an investor receives advice from an EMD, such as Pinnacle
Wealth Brokers Inc. (Pinnacle), they can invest up to $100,000 in
any 12-month period provided that the registrant (e.g., Pinnacle)
determines that any such investment is a suitable investment for
The income and asset thresholds for an eligible investor
remain lower than those which apply to an accredited investor.
As many more Ontario retail investors would satisfy the income
and asset tests under the new OM Exemption than the existing
accredited investor exemption, the private markets are now more
broadly open to Ontario investors.
e. Risk disclosure forms and other documents designed to
Under the OM Exemption, all investors are required to
complete and sign a Risk Acknowledgement Form, which
highlights for investors the key risks associated with investing in
securities acquired under the OM Exemption.
In addition, there are two Schedules that must be completed
by each investor who is an individual, in conjunction with the Risk
Acknowledgement Form. One such Schedule asks investors to
confirm their status as an eligible investor, non-eligible investor,
accredited investor or an investor who would qualify to purchase
securities under the Family, Friends and Business Associates
Exemption. The other Schedule requires confirmation that the investor
is within the aggregate investment limits, where applicable. Investors
that are not individuals do not have to complete these Schedules.
f. What continuous disclosure obligations are imposed on
a private company after it raises money under the OM
After a company raises capital under the OM Exemption
in Ontario, it has certain continuous disclosure obligations to
investors. That means the company has to keep providing
investors with certain information after an offering is completed.
This is called a company’s continuous disclosure obligation.
Private companies that use the OM Exemption are required
to provide investors with audited annual financial statements, as
well as a notice that accompanies the financial statements which
describes how the money raised under the OM Exemption has
Private companies who are raising capital in Ontario are also
required to provide notice to investors of the following events,
within 10 days of the event occurring:
• a discontinuation of the issuer’s business;
• a change in the issuer’s industry; or
• a change of control of the issuer.
Not all Provinces require this type of continuous disclosure
reporting but there are important investor protection safeguards
that Ontario decided to build into its version of the OM Exemption.
5. What is Pinnacle’s role in capital raising?
Many companies that need access to capital do not know how
to reach investors. Pinnacle is an intermediary that puts investors
who are looking for private market investments into contact with
companies that are looking to raise capital.
Anyone cannot act as an intermediary in Ontario. If an
individual or entity is acting as an intermediary and is in the
business of trading securities in Ontario they have to be registered
with the OSC.
Pinnacle is registered with the OSC, and other securities
regulators across Canada, as an EMD. This allows Pinnacle, or
any other registered EMD, to ‘broker’ a trade between a retail
investor and a company looking to raise money. Simply, the EMD
such as Pinnacle, is the middleman in the transaction.
Pinnacle currently has over 120 licensed dealing
representatives across the country that work directly with investors
to determine their investment needs and recommend suitable
private market investments to diversify their holdings.
6. How does Pinnacle help to minimize risk with an eye toward
higher investment returns?
As a registered EMD, Pinnacle has certain legal responsibilities
to ensure that an investment is suitable for an investor. One
requirement is that Pinnacle and its dealing representatives have
a “know-your-product” obligation under securities laws. This
requires Pinnacle to undertake due diligence on any investment
it considers selling to investors. If a product does not pass
Pinnacle’s due diligence review and investigation, Pinnacle rejects
the offering and does not sell it to investors.
Due diligence is the process of reviewing a company’s
offering documents and checking, to verify and confirm the facts
and statements in the OM to ensure there is no misrepresentation.
If there is a misrepresentation, investors have statutory rights
of action to sue the company for damages or get their money
back in accordance with certain terms and conditions, so proper
disclosure is critical to a company and to investors. Due diligence
involves reviewing the financial and non-financial information and
the business of the company.
Financial due diligence involves examining a company’s
financial statements and any financial information included in
an OM including pro forma financial information. It also includes
reviewing a company’s financial model and undertaking a
sensitivity analysis to stress test a company’s assumptions and
other qualifications in its model.
Non-financial due diligence includes reviewing the
non-financial information in an OM and any marketing materials.
Based on our review of any offering documents, Pinnacle would
typically provide a company with due diligence questions and a
document requisition letter and expects responses and documents
to review as part of its due diligence.