Canadian securities legislation gives investors certain statutory rights intended to protect against misrepresentation in offering documents. Which rights apply, and how they operate, depends on the distribution channel through which units were acquired. This article is a plain-language explainer of the general framework; it is not a legal opinion, and it does not describe the specific rights applicable to any particular offering. An investor should consult the risk acknowledgement or offering document received at the time of subscription, and qualified legal counsel, for the rights applicable to their own investment.

Rights attached to a prospectus offering

Where units are distributed under a prospectus, applicable provincial securities legislation — for example, section 131 of the British Columbia Securities Act and equivalent provisions in other provinces — generally gives a purchaser a statutory right of rescission or a right of action for damages against the issuer, its directors, and certain other parties, if the prospectus contains a misrepresentation. This right typically must be exercised within a prescribed limitation period following the purchase, and the specific procedural requirements vary by province. The purpose of the right is to give an investor a remedy where the disclosure document they relied on turns out to have been materially inaccurate.

Rights attached to the accredited investor exemption

Units distributed under the accredited investor exemption of NI 45-106 — described in detail in Accredited Investor Eligibility — are not accompanied by an offering document that carries the same statutory misrepresentation liability as a prospectus, because the exemption is premised on the purchaser's financial sophistication rather than on a regulator-reviewed disclosure document. A purchaser under this exemption generally does not receive an automatic statutory right of rescission equivalent to the prospectus right described above. This is a structural feature of the exemption, not an oversight, and it is the reason accredited investor purchasers complete a risk acknowledgement confirming their understanding of the reduced disclosure protection at the time of subscription. Contractual remedies for actual fraud or misrepresentation outside the statutory framework may still be available under general principles of law, independent of securities-specific statutory rights.

Rights attached to the offering memorandum exemption

A separate exemption available under Canadian securities law, the offering memorandum exemption of NI 45-106, is generally accompanied by a mandated statutory right of action for damages or rescission if the offering memorandum contains a misrepresentation — a protection built into that specific exemption because it can be used to distribute securities to purchasers who are not required to meet the accredited investor threshold. See Exemptions for the specific exemptions the Direct-Hold Solutions rely upon; the offering memorandum exemption is described here for comparison and is not the exemption used for the distributions described elsewhere in this wiki.

Rights across jurisdictions

The United States, Spain, and Mexico each apply their own statutory investor protection framework to securities distributions in their jurisdiction, and the mechanics of those protections differ from the Canadian framework described above. An investor acquiring units in a jurisdiction other than Canada should not assume that the rights described in this article apply; the applicable offering document for that jurisdiction's vehicle sets out the rights that do apply.

See also

• Exemptions — the specific prospectus exemptions relied upon in each jurisdiction
• Accredited Investor Eligibility — the exemption most commonly used for private placements
• Legal Proceedings — disclosure of proceedings that could affect these rights