The Nova Scotia Securities Commission (NSSC) has issued an order exempting small, community based investment funds from its rules for fund managers, subject to certain conditions.
The NSSC announced today that, following a public consultation process, it has adopted a new policy towards so-called Community Economic Development Investment Funds (CEDIFs), which exempts them from the requirements that are generally imposed on investment fund managers.
CEDIFs are intended to encourage capital raising by small, community based issuers, run by non-professional managers. However, in cases where these funds don’t control the firms they invest in, they are considered investment funds under securities laws, which means they face registration, and accompanying, requirements such as capital requirements and disclosure obligations. However, many of these funds “may have difficulty meeting these requirements”, the commission notes.
So, in order to maintain the program, while also meeting its investor protection goals, the NSSC has crafted a policy exempting these funds from the investment fund manager rules, subject to certain conditions.
To be exempted, the CEDIF must either limit the capital it raises under each offering to $3 million, and $6 million in total; or, disclose the investments that it will make in its offering document, and obtain investor approval for any changes to those investments. For funds that already exist, and exceed the capital raising limits, they must make disclosure to investors and obtain approval for further changes.
A fund that relies on the exemptions must also include a specific warning in its offering document, disclosing that it will not be required to comply with the requirements of an investment fund manager.
There is also a condition that the CEDIF, and any affiliated funds, can only raise up to $15,000 per investor per year; or $30,000 per year, if they get advice from an investment dealer or exempt market dealer. These investment limits do not apply to accredited investors.