Accredited Investor Rules in Canada: What They Are and Why They Matter
Canada's accredited investor definition determines who can access most private investment opportunities. Here is a plain-English breakdown of the rules, the thresholds, and what they mean for investors.
Access to the most attractive private investment opportunities in Canada — private REITs, private equity funds, exempt market offerings — is largely gated behind a single regulatory concept: the accredited investor.
Understanding this designation is essential for anyone who wants to participate in Canada's exempt market.
What Is an Accredited Investor?
The accredited investor definition is set out in National Instrument 45-106, the pan-Canadian securities regulation governing prospectus exemptions. The most commonly applied thresholds for individuals are:
Financial assets of at least $1 million, either alone or with a spouse, not including real property. Net assets of at least $5 million, either alone or with a spouse. Annual net income before taxes of at least $200,000 in each of the two most recent years, with a reasonable expectation of exceeding that level in the current year. Or combined annual net income with a spouse of at least $300,000 in each of the two most recent years.
Why the Designation Exists
The accredited investor exemption rests on the theory that sophisticated, high-net-worth investors can protect their own interests without the full disclosure requirements of a prospectus. They are presumed to have the financial resources to absorb potential losses and the capacity to evaluate complex investment risks.
Critics note that net worth is an imperfect proxy for sophistication. A wealthy individual may have no financial knowledge, while a financially capable middle-income professional may be excluded from opportunities that would genuinely suit their circumstances. This tension is ongoing in Canadian securities regulation.
What Accredited Investors Can Access
Under the accredited investor exemption, issuers can raise capital without filing a full prospectus. This is how most private funds, private REITs, and exempt market offerings operate.
Common investment types available to accredited investors include private real estate funds and REITs, mortgage investment corporations, private equity and venture capital funds, and structured products not publicly listed.
The Offering Memorandum Exemption
For investors who do not meet the accredited investor thresholds, the offering memorandum exemption provides an alternative pathway. Under this exemption, non-accredited investors can participate in exempt market offerings, subject to investment limits based on their income and net worth.
This exemption has meaningfully expanded access to private investments for a broader range of investors.
Working With an Exempt Market Dealer
Most private investments in Canada are distributed through exempt market dealers — registered dealers who specialize in exempt market securities. An exempt market dealer is required to assess suitability before recommending an investment, and to provide the offering memorandum for your review before you invest.
If you are exploring private investments, understanding your investor category and working with a registered exempt market dealer is the right starting point. This is not investment advice — always consult qualified professionals before making investment decisions.