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What is an Exempt Market Dealer? : A Quick Overview




 

An Exempt Market Dealer (EMD) is a type of financial firm or individual registered with securities regulators in Canada that is authorized to facilitate the sale of exempt market securities to investors.

 

Key Points:

 

Regulatory Oversight:

EMDs operate within the exempt market, which refers to securities offerings exempt from certain regulatory requirements, such as the need to file a prospectus. Despite being exempt from prospectus requirements, exempt market securities are subject to other regulatory obligations and oversight.

 

Authorized Activities:

EMDs are permitted to engage in activities related to the sale and distribution of exempt market securities. This includes facilitating transactions, providing investment advice, and managing client accounts within the exempt market.

           

Investor Eligibility:

EMDs typically cater to accredited investors, institutional investors, and other qualified individuals or entities who meet specific criteria set by securities regulators. These investors are presumed to have the financial sophistication and resources to evaluate and bear the risks associated with exempt market investments.

           

Due Diligence:

EMDs are responsible for conducting due diligence on exempt market securities and ensuring that they are suitable for the investors they serve. This may involve assessing the issuer's financial condition, business prospects, and regulatory compliance, among other factors.

           

Compliance and Regulation:

EMDs are subject to regulatory requirements and oversight by securities regulators, such as the Canadian Securities Administrators (CSA) and provincial securities commissions. They must adhere to standards of conduct, disclosure, and compliance to protect investors' interests and maintain the integrity of the exempt market.

           

Investor Protection:

While exempt market investments offer opportunities for diversification and potential returns, they also carry risks, including illiquidity, lack of transparency, and potential loss of investment capital. EMDs play a crucial role in educating investors about these risks and ensuring that they make informed investment decisions.

 

In summary, exempt market dealers are registered entities or individuals authorized to facilitate the sale of exempt market securities to eligible investors. They operate within the exempt market space and are subject to regulatory requirements and oversight to protect investors and maintain market integrity.

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