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exempt market terminology

Canadian Exempt Market Terminology

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Exempt Market

Exempt market securities are securities issued in Canada that fall under National Instrument 45-106. They are exempt from prospectus requirements and hence require less disclosure than a prospectus offering.

Prospectus

A prospectus is a legal document issued by companies that are offering securities for sale. Mutual funds also provide a prospectus to potential clients, which includes a description of the fund’s strategies, the manager’s background, the fund’s fee structure and a fund’s financial statements.

Offering Memorandum

An offering memorandum (OM) or offering circular (OC) is a type of prospectus (finance) for a bond or other security. Sometimes, this is also referred to as a prospectus, offering memorandum, or short OC.

Crowdfunding

Crowdfunding is the process of raising money to fund what is typically a project or business venture through many donors using an online platform.

Securities

A security is a tradable financial asset of any kind. Securities are broadly categorized into: debt securities, (e.g., banknotes, bonds and debentures) equity securities, (e.g., common stocks) derivatives, (e.g., forwards, futures, options and swaps).

Start-up

A company that is in the first stage of its operations. These companies are often initially bankrolled by their entrepreneurial founders as they attempt to capitalize on developing a product or service for which they believe there is a demand.

Accredited Investor

-An individual who, alone or together with a spouse, owns financial assets worth more than $1 million before taxes but net of related liabilities;

-An individual, who alone or together with a spouse, has net assets of at least $5,000,000;

-An individual whose net income before taxes exceeded $200,000 in both of the last two years and who expects to maintain at least the same level of income this year;

-An individual whose net income before taxes, combined with that of a spouse, exceeded $300,000 in both of the last two years and who expects to maintain at least the same level of income this year;

-An individual who currently is, or once was, a registered adviser or dealer, other than a limited market dealer;

-Financial institutions;

-Governments and governmental agencies;

-Insurance companies;

-Pension funds;

-Registered charities;

-Certain mutual funds, pooled funds and managed accounts;

-Companies with net assets of at least $5 million;

-Persons or companies recognized by the OSC as an accredited investor.

 Eligible Investor 

A person whose (i) net assets, alone or with a spouse, in the case of an individual, exceed $400 000, (ii) net income before taxes exceeded $75 000 in each of the two most recent calendar years and who reasonably expects to exceed that income level in the current calendar year, or (iii) net income before taxes, alone or with a spouse, in the case of an individual, exceeded $125 000 in each of the two most recent calendar years and who reasonably expects to exceed that income level in the current calendar year.

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Investors

An investor is a person who allocates capital with the expectation of a financial return. The types of investments include: equity, debt securities, real estate, currency, commodity, derivatives such as put and call options, etc.

Issuers

Issuer is a legal entity that develops, registers and sells securities for the purpose of financing its operations. Issuers may be domestic or foreign governments, corporations or investment trusts.

Private Equity

In finance, private equity is an asset class consisting of equity securities and debt in operating companies that are not publicly traded on a stock exchange. A private equity investment will generally be made by a private equity firm, a venture capital firm or an angel investor.

Mezzanine Lenders

Mezzanine financing is basically debt capital that gives the lender the rights to convert to an ownership or equity interest in the company if the loan is not paid back in time and in full. It is generally subordinated to debt provided by senior lenders such as banks and venture capital companies.

Venture Capitalist

Venture capital (VC) is money provided to seed early-stage, emerging and emerging growth companies. Venture capital funds invest in companies in exchange for equity in the companies they invest in, which usually have a novel technology or business model in high technology industries, such as biotechnology and IT.

Angel Investor

An angel investor or angel (also known as a business angel, informal investorangel funder, private investor, or seed investor) is an affluent individual who provides capital for a business start-up, usually in exchange for convertible debt or ownership equity.

Endowment Funds

An endowment fund is created when a donor or the Board of Trustees specify that a gift is to be invested and only the income earned on that gift may be spent for a specific purpose. The gift amount is referred to as the principal or corpus and is held in a fund that is managed by the Finance Department.

 

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