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by
John J. Pizale, BSc, JD
AUTHOR
John J. Pizale, BSc, JD
GENERAL COUNSEL
John is a member of the Law Society of Ontario. He was the former President of a major Canadian real estate developer and a Managing Partner of a prominent Toronto based law firm. He also formerly served as a Member of the Board of Trustees of a $1 billion Canadian pension fund and is a former Principal of a leading private media and internet company. As Fundscraper’s General Counsel and member of the credit committee, John provides general legal and strategic business advice related to everyday operations and corporate growth.

Introduction to the Exempt Market Dealer

Many Canadians are keen to invest in real estate-backed securities. 

After all, Louis Glickman, the renowned American investor and philanthropist famously said: 

“The best investment on earth is earth.” 

Yet often all the bureaucratic and complicated legal protocols hold us back. 

This article intentionally avoids arcane legalese and references to specific provisions of statutes and regulations, policies, bulletins and adjudicated cases. That’s right, there will be no long explanations of what a national instrument 45-106 prospectus, national instrument 31-103 or 45-106 prospectus and registration is.

Instead, the intent is to explain in understandable language how a layperson can best participate in real estate investing using an Exempt Market Dealer (“EMD”) to a meaningful advantage.

A Background on Exempt Market Dealers

It’s important to understand the basic background related to the regulated Canadian securities investment landscape

Start with the fact that interests in real estate are considered “securities”. 

Securities legislation and regulators across Canada are increasingly looking to implement appropriate levels of consumer protection measures, especially since the financial crisis of 2007-2008. 

Typically, companies who offer stocks, bonds, mutual bonds and the like in the publicly traded capital market are required to prepare a disclosure document called a “prospectus” and have it precleared by a securities regulator like the Ontario Securities Commission (the “OSC”) before going public. 

However, there are some important prospectus and registration exemptions, one of which is where there is an offering memorandum (“OM”) detailing all the material facts to assist prospective purchasers in their decision whether to invest in the securities being offered by an issuer. An OM is similar to a prospectus but need not have the regulator’s prior sign-off.  

Interested in Learning More Inside-Industry Real Estate Investing Knowledge? Read these Articles Today.

It is this OM Exemption that gives birth to alternative investments exempted from the rigours of a prospectus and brings into play an Exempt Market Dealing representative, all within what is called the Exempt Marketplace

Exempt Market Dealer

Examining the Exempt Market Dealer

The Exempt Market Dealer is the vehicle that facilitates your purchase of real estate-backed securities in the Exempt Marketplace. 

An Exempt Market Dealer is a fully registered government-regulated securities dealer who acts as a dealer to distribute prospectus-exempt securities to qualified investors. Those include various categories of investors, defined by prescribed income and asset tests and investment limits. An exception is made for so-called “accredited investors” where investments and investment funds are not capped. 

The criteria for determining where you fit in can be complex and is beyond the scope of this paper, but suffice it to say, the Exempt Market Dealer will figure it out as part of their “Know Your Client” (“KYC”) obligations.

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This means collecting salient information about a client’s complete financial circumstances, investment objectives and risk tolerance. Importantly, any Exempt Market Dealer in Canada must ensure the exempt market security is “suitable” for the investor. 

For example, an elderly investor’s proposed investment of 90% of their wealth into a risky long-term real estate play is “unsuitable” and in the ordinary course must be rejected by the Exempt Market Dealer.

Why Choose Fundscraper as Your Exempt Market Dealer?

Fundscraper Capital Inc. (“FCI”) is Canada’s premier online platform for real estate investing. FCI is registered on the Exempt Market Dealer List as an Exempt Market Dealer with the Ontario, British Columbia, Alberta, Quebec, New Brunswick, and Prince Edward Island Securities Commissions.

Want to Learn More About How Fundscraper Works?

Watch our How-it-Works video and learn about your investment options today!

As such, FCI files regular reports to and is subject to periodic audits by regulators. It meets government requirements for operating capital (such as mutual funds) and must make timely reports to clients.

What sets FCI apart?

  • An informative, easy-to-navigate website www.fundscraper.com
  • Modern technology and best of practice compliance standards.
  • A marketplace with a wide variety of product offerings by proven issuers for the most conservative risk-averse investors to those more adventuresome.
  • In addition, we offer Fundscraper Property Trust sponsored investment opportunities, which qualify for investments by Registered Funds, like RRSPs, RIFFs, and TFSAs. 
  •   A comprehensive dashboard that keeps you informed in real-time of the status of your investments handled by FCI.
  • Concierge services by knowledgeable Dealer Representatives, all of whom have completed extensive training and licensing requirements of the OSC.
  • FCI’s senior management and Board of Advisors are comprised of seasoned experts in real estate development, finance, private equity, law and technology. 
  • FCI’s track record includes 7500+ registered members of its community, 10%+ in earned net annualized return since it launched in 2017 and $420 million in capital placed in real estate projects across North America. 

Conclusion on Exempt Market Dealers

Don’t bother taking an Exempt Market Dealer course. Instead, engage Fundscraper and make us your trusted ally by joining the Fundscraper community of investors.

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