OSC issues investor alert

The Ontario Securities Commission released an investor alert last month that 50plus.com users should be aware of.

It relates to a growing misuse of what is known as the “accredited investor exemption”. This is a new provision that allows securities to be sold without a prospectus to people who meet the “accredited investor” definition, which requires that you have more than $1 million in net assets or income of $200,000 a year. (These are Ontario rules, other provinces have their own variations.)

The intent of the change, which came into effect last year, was to ease the $150,000 minimum on securities being offered on a non-prospectus basis (again, each province sets its own minimum) so as to make it easier for small businesses to access capital, while providing protection to investors.

The OSC says that some unscrupulous salespeople are persuading people who do not meet the accredited investor criteria to sign a form stating they are accredited (in effect, to lie) so that they can then invest in high-risk ventures.

Says the OSC: “They do this by suggesting that the government unfairly allows wealthy people to take advantage of the reay great investment opportunities.”

The Commission says to be especially wary of Internet and telephone solicitations and adds: “If someone asks you to fill out a form with false information, ask yourself if this is the kind of person you should rely on for investment advice.” (July 2003)