Wealth Up Investments | Your Exempt Market Specialists
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Risks & Rewards of the Canadian Exempt Market

What are the Risks of Investing in the Exempt Market?

The Exempt Market offers private investment opportunities and is an important part of the Canadian financial system. It is important for investors to realize though that private securities are generally sold using an "exemption to prospectus", meaning that issuers in the Exempt Market that offer these investments are not required to complete a full prospectus.  Most issuers provide an "Offering Memorandum" which can be very similar to a prospectus but likely won't provide as much detail.  A prospectus is very detailed and is meant to give an investor all the facts to make an informed decision.  Investing under one of the “exemptions” to a prospectus means that you might be taking on more risk as some of these details might be missing.  Other risks include (but are not limited to):

  • Most exempt market securities are subject to resale restrictions which means that you may not be able to sell them for a certain period of time.
  • Even if there are no resale restrictions, there might not be a market to sell your securities.  For example, you might not be able to find a purchaser or the purchaser might not be qualified to buy them from you.  Generally, the issuers are under no obligation to help you sell your securities or buy them back from you if you run into hard times.
  • Most exempt securities are not liquid which means that you can't sell them in a short period of time and turn them into cash.
  • Issuers might try to sell their exempt securities without going through an Exempt Market Dealer which means that you might not get the same protection that you would get if you bought them through a dealer.

How Can You Mitigate These Risks?

  • Buy all of your Exempt Market Products through an Exempt Market Dealer.  They are registered with their provincial Securities Commission and have diligence teams to thoroughly review each issuer and investment that they offer.
  • Don’t invest money that you can’t afford to be without.  For one thing, the investment might take longer than expected to finish and there is always the possibility that you could lose some or all of your money.
  • Do your own due diligence before you invest.

What are the Rewards of Investing in the Exempt Market?

  • The Exempt Market offers investors a broad spectrum of investments that are not publicly traded on stock exchanges.  This means they are not subject to the emotional volatility of the stock markets and can provide more predictable returns.
  • Exempt Market Products often provide higher returns and greater diversification when compared with other, conventional investment products.
  • Exempt Market products can provide investors with cash flow producing investments such as fixed income bonds & mortgage investment corporations.
  • Due diligence is done for you through the Exempt Market Dealer.  This doesn’t mean you shouldn’t do your own but it offers a level of confidence that the product has been thoroughly reviewed before it is offered to you.