The Exempt Market has definitely seen it’s ups and downs through the 2000’s, especially in Alberta.
It used to be called the private or alternative market and in the past, investments were targeted to higher net worth investors. They invested in products like Hedge Funds, Limited Partnerships, Principal Protected Notes, etc. and used the same prospectus exemptions that we use today.
In the early to mid 2000’s, Alberta saw the Exempt Market turn retail. Real estate investment companies shot up everywhere with projects and investments that were very appealing to the average investor because of the high interest rates and low minimum investment amounts. It was also a time of low bank rates, easy credit, secured lines of credit, and a robust economy.
As more of these companies sprung up in Alberta, the risk also shot up for investors. It became very easy for almost anyone to buy real estate, make plans to change or improve it in some way and start raising money in a very short time frame. Those investors interested in purchasing Exempt Market products dealt with companies and individuals with varying levels of expertise and training. While it was possible to connect with an excellent company or a skilled advisor, it was also possible to connect with an inexperienced or fraudulent company and someone with little to no training with respect to Exempt Market products. The market was not tightly controlled by the provincial securities regulators at that time and when the global economy sank and capital dried up, several companies were not able to weather the storm.
This was a terrible time for investors who lost money but it was also a huge turning point for the Exempt Market overall.
In September 2009, the federal government introduced new legislation and reformed the marketplace completely.