How to answer LP questions about GPs not being required to be registered with OSC

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Community Member

Edited by:

Community Member

on July 14, 2023

Jul 14, 2023

I've been told that raising from accredited Ontario Canada investors would subject GPs to the OSC regs. Do I need to register with OSC before launching the fund? I've been told if I am representing myself as a fund and making buy and sell decisions, I'm filing in the role of an investment fund/portfolio manager, which apparently requires registration with the regulator. How do we not have to register with the OSC first before raising capital? Or talking to investors.

Licence OSC

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3 answers

Haw Kuo

Accepted Answer

Aug 29, 2023

*For informational purposes only

**Fund managers should avoid any activities which may be construed as providing or interpreting legal tax, or other advice to prospective limited partners.

Question: Does a Canadian fund manager need to register as an investment fund manager, a portfolio manager, or an exempt market dealer with the Ontario Securities Commission?

Answer: Generally speaking, if the fund being managed is considered a venture or private equity fund (and not a hedge fund), the fund manager does not need to register.

A venture or private equity fund must make primarily “active investments” (as opposed to “passive” investments made by hedge funds), typically for purposes including:

Exercising or seeking to exercise control of an issuer in which it invests; or
Being actively involved in the management of an issuer in which it invests.

Indicators of “active investments” can include but are not limited to the following:

Holding securities representing more than 10% of the outstanding equity or voting securities of portfolio company;
Having the right to appoint board or board observer seats for a portfolio company;
Having the ability to impose restrictions on the management, or approval or veto rights over decisions made by the management of a portfolio company;
Providing advice or mentorship to a portfolio company.

Should these criteria ever be put to the test, it will come down to a factual analysis of the circumstances – there is no “check the box” type of exercise done.

Please refer to the Ontario Securities Commission’s website for general guidance on this topic, or consult an experienced, qualified fund/securities attorney in Ontario for assistance with a specific situation.

Thank-you very much for this thorough response. This is helpful.

Community Member

Aug 30, 2023 6:56pm

Here is a post from Gowling WLG in 2012 that also supports the response. (3rd paragraph) https://gowlingwlg.com/en/insights-resources/articles/2012/new-canadian-investment-fund-manager-registration/

Community Member

Aug 30, 2023 7:15pm

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Anna Deaux

Jul 21, 2023

This is a great question. We currently conducting research to ensure that our answer aligns with the latest regulatory guidance. We anticipate providing an answer shortly.

Thanks Anna, any follow up to this question?

Community Member

Jul 27, 2023 6:37pm

Wanted to check in on this question!

Community Member

Aug 29, 2023 4:26pm

Just spoke with the team, reply coming soon...

Travis Giggy

Aug 29, 2023 4:46pm

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