If you’ve started exploring private investments, such as Mortgage Investment Corporations (MICs), private equity, exempt market securities, or real estate development deals, you’ve likely come across the term “Accredited Investor.” But what does it actually mean? And why does it matter in Canada’s investment landscape?
In this article, we break down what an accredited investor is, why the category exists, and how it unlocks access to unique investment opportunities often unavailable to the general public.
What Is an Accredited Investor in Canada?
In Canada, an accredited investor is an individual or entity that meets specific income, asset, or professional criteria outlined by securities regulators — primarily the Ontario Securities Commission (OSC) and the Canadian Securities Administrators (CSA).
The purpose behind the definition is simple:
To ensure that certain private, higher-risk, or more complex investments are offered only to investors who have the financial capacity or expertise to understand and withstand the risks.
Accredited investors have access to exempt market securities — investments that do not require a prospectus, such as private lending funds, MICs, private REITs, and certain corporate offerings.
Accredited Investor Criteria (for Individuals)
An individual qualifies as an accredited investor if they meet any one of the following tests:
1. Financial Asset Test
You qualify if you have:
- Over $1 million in financial assets before taxes but net of liabilities (Financial assets include cash, stocks, bonds—not real estate.)
2. Net Worth Test
You qualify if your:
- Net worth exceeds $5 million, on your own or combined with your spouse (This includes real estate and other tangible assets.)
3. Income Test
You qualify under either income threshold:
- $200,000 or more in net income in each of the last two years, or
- $300,000 or more combined income with a spouse in each of the last two years
- Plus reasonable expectation of the same for the current year
Accredited Investor Criteria (for Entities)
Corporations, trusts, or partnerships qualify when they meet certain financial thresholds, including:
- Having net assets of at least $5 million, or
- Being 100% owned by accredited investors
Corporations can also invest under alternative exemptions such as the $150,000 minimum investment rule, provided the entity—not the individual—meets the requirements.
Why Does the Accredited Investor Category Exist?
The accredited investor system is designed to protect the public while allowing sophisticated investors access to private markets. Here’s why it matters:
1. Investor Protection
Private investments can carry unique risks: reduced liquidity, limited reporting, and higher complexity. Regulators want to ensure participants have either:
- The financial resilience to absorb potential losses, or
- The sophistication to understand the risks.
2. Access to High-Quality Private Investments
Accredited investors can participate in opportunities not sold through traditional banks or public markets. These might include:
- Mortgage Investment Corporations (MICs)
- Private lending portfolios
- Real estate development syndications
- Exempt market funds
- Preferred share structures
- Private equity offerings
These investments often aim for higher yields, diversification, and asset-backed security, depending on the offering.
3. Streamlined Compliance for Issuers
Private investment firms, like MICs, can offer securities under exemptions that do not require a prospectus. This reduces administrative burden and allows capital to flow more efficiently to real-estate-backed projects and businesses.
Benefits of Being an Accredited Investor
1. Access to Exclusive Opportunities
Accredited investors see deals before they ever reach the public or traditional advisors.
2. Higher Potential Returns
Private investments—especially asset-backed loans—can offer stable, attractive yields.
3. Portfolio Diversification
Private credit, mortgage pools, and exempt market funds add non-correlated assets to an investor’s portfolio.
4. Professional Management
Most exempt investments are managed by licensed or experienced professionals with strict policies, oversight, and internal controls.
How Do You Prove You Are an Accredited Investor?
Private issuers must confirm your accredited status through:
- A signed accredited investor questionnaire
- A risk acknowledgement form (Form 45-106F9) when required
- Supporting documentation (only in some cases)
Your investment dealer or MIC will guide you through this process to ensure compliance with OSC and CSA regulations.
Final Thoughts
Being an accredited investor in Canada opens doors to a world of private investment opportunities that can enhance diversification and generate attractive returns. While the criteria are specific, the benefits, particularly in today’s evolving financial landscape, can be substantial.
If you’d like to learn more about private lending, MIC investing, or whether you qualify as an accredited investor, our team here at Erie Shores Capital is here to help clarify your eligibility and explore suitable investment options.