Private Capital Markets

The private capital markets, or exempt market, are fairly difficult to navigate and unknown by many, we have tried to highlight the usual uncertainties below.


The Private Capital Markets, also known as the Exempt Market, describe the same financial investment segment, which offers a placement of investment dollars without the requirement to issue a full prospectus and without the full public disclosure requirements. Under the rules laid out in National Instrument 45-106 & 31-103 each provincial securities authority allows ‘Exempt Market Dealers’ (like Privest Wealth Management) to offer securities in organizations that, for a variety of reasons, are not available on the publicly traded stock markets. Those provincial authorities (in Privest’s case, the Alberta Security Commission) still provide a regulatory framework, oversight and control over Private Capital securities, Exempt Market Dealers and advisors.


An Exempt Market Dealer, or ‘EMD’, is an investment firm that acts as a crucial intermediary advisory party found between investor and investment issuer, which would be the company offering the security. They are licensed to distribute Private Capital Investments that have not been qualified by prospectus, but ‘Exempt’ from this process based on rules and regulations of different provincial securities commissions.

The Exempt Market Dealer from an advisory perspective is responsible for evaluating potential investors suitability in any particular exempt market security based on their personal financial situation. This exploration has been labeled the ‘Know Your Client’ process, or KYC. Upon determining a number of financial planning metrics including the investors’ level of risk, appropriate portfolio allocation, and diversification strategy, the advisor is able to suggest a number of different Exempt Market Investments that have been approved by an Exempt Market Dealer, like Privest.

Across Canada, there are countless opportunities to invest in products throughout the Exempt Market. However, similar to the public markets, not all investments are of the same caliber in strategy, risk, and return. Exempt Market Dealers evaluate these opportunities through an in depth due diligence process, that evaluates how the investment is structured, the opportunity the company is attempting to pursue, and likelihood of investor success. Only those products of which are deemed of the highest caliber can be introduced to investors from the advisors of that Exempt Market Dealer.

The Exempt Market Dealers are also responsible for navigating controls and compliance within a complex regulatory framework, of which varies province to province in Canada.


Exempt Market investments are an important part in bringing diversification to an investment portfolio. Unlike the bond market, they are reflective of a given issuer’s perceived opportunity or need, rather than overall sentiment about segment growth. Compared to the stock market, they can be less volatile, particularly with regards to investor sentiment and sector performance. If you have ever held an industrial stock, you have seen what happens to your investment value when competitors start scaling back their guidance or fail to meet expectations; it is common that the entire sector suffers a loss. With private capital, the primary determinant of success is the success of the issuing company.

Often, exempt market investments offer higher rewards in exchange for lower liquidity options. Unlike ‘angel investing’ or ‘venture capital,’ exempt market products are almost always made in companies that have existing operations and sales. They may be trying to capitalize on a new opportunity, raising capital to fuel acquisitions, or any number of growth avenues, but they almost universally do not want to engage in the expense or corporate distraction of issuing a public stock offering.

While Exempt Market offerings are not for everyone, the average and sophisticated investor is always looking for ways to diversify their portfolio, preserve their capital and maximize their returns. Exempt Market investments are one more tool in your investment arsenal, and when deployed properly, can be a powerful vehicle.


The majority of established Canadians should fall into a category that allows them to invest in the Exempt Market, but due to provincial regulatory oversight and rules laid out in National Instrument 45-106, some minimum wealth requirements must be attained. An investor is deemed ‘Eligible’ by meeting one or more financial criteria that generally involve breaking a threshold for individual, or household, net assets or income.

‘Accredited Investors’ are those that meet more strict wealth requirements, however, this is generally paired with more autonomy in investment allocation and regulatory constraint as they are deemed ‘sophisticated’ investors. Each provincial securities authority places different rules and regulations on eligible and accredited investment, which is why it is integral to partner with a quality Exempt Market Dealer.

Our responsibility is navigating these regulatory environments; the best way to answering these questions is by asking them. Contact Us. Your success is our opportunity.


All investment involves some form of risk, whether it is low or negative returns, or loss of investment capital. Securities including debt, equity, asset-backed securities, investment funds and derivatives can be sold within the Exempt Market, without a prospectus (hence, the term ‘Exempt Market’), under certain strict rules and regulations. Prospectus exemptions can help businesses because it lets them raise money without the time and expense of preparing a prospectus. In turn, this provides access to capital, and offers investors more choice, but investors should be aware of the risks associated with investing in the exempt market, including:


As with any investment, you could lose your investment capital in the event negative market or corporate situations arise. Privest carefully analyzes all prospective issuers’ offerings, and in many cases conducts third-party reviews and analysis to understand the risk, prior to making that investment opportunity available for sale. Privest Wealth Management or your investment advisor can help you understand the risks and opportunities.


Companies raising money through a prospectus exemption may not be required to provide the same amount of information as a public company. Regular reporting to private investors is common, but may not have the same depth of detail or standardization that would be required in the public stock market, such as comprehensive audited financial statements.


Lack of liquidity is one risk that investors should be fully aware of prior to making an investment in the Private Market. Securities in this market typically aren’t publicly traded, so you might not be able to sell your investment quickly, or in some cases, at all. As a result, you should be confident and fully knowledgeable about the issuer and their plans before you invest. The best way to do that is to establish a trusted advisor relationship, with Privest or your independent advisor.


Provincial Securities Commissions are charged with monitoring and enforcing different guidelines laid out in federal legislation, as well as province specific regulation. As each has their regulatory methodology and framework, it is difficult to highlight all aspects in a brief summary.

The Alberta Securities Commission (ASC) regulates the ‘Exempt Market’ under the guidelines of National Instrument 45-106 and 31-103. The ASC retains full oversight into the industry, including the ability to audit, investigate and penalize issuers, dealers and advisors who do not follow the rules, as is the case across Canada.

For more on the ASC’s role in the market, please visit their website here.

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