The exempt market is a relatively new term for investors and many aren’t even sure what it means. In the past we referred to it as the “private” or “alternative” market and many of the companies involved were doing real estate based investments.
To put it in simple terms, when capital is raised by Canadian businesses or the government of Canada, they generally do so through a prospectus. A securities regulator reviews the prospectus for completeness including a full disclosure of risk and a full disclosure of material facts. To sell securities under a prospectus is very costly and onerous and can deter smaller companies in their ability to raise capital. Many of these companies rely on “exemptions” from the prospectus requirements in order to raise capital for their projects.
Common exemptions include:
In summary then, investments that are sold using one of these exemptions make up the Exempt Market.