Exempt Market Dealer

What is an Exempt Market Dealer (EMD)?

Exempt Market Dealers (“EMD”) are exempt market securities dealers registered under provincial securities legislation in one or more jurisdictions in Canada. The regulatory framework for EMDs is set out in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations which applies in every jurisdiction across Canada.

EMDs may act in two primary capacities in the capital markets: 1) as a dealer or underwriter for any securities which are prospectus exempt, or 2) as a dealer for any securities, including investment funds which are prospectus qualified (mutual funds) or prospectus exempt (pooled funds), provided they are sold to clients who qualify for the purchase of exempt securities. The qualification criteria for exempt purchasers and exempt securities are found in National Instrument 45-106 Prospectus and Registration Exemptions.

What makes EMDs different form other types of securities dealers?

The other categories of securities dealer, in addition to EMDs include:

  • Investment dealers may act as a dealer for any type of securities and any type of clients, including “retail” clients – investment dealers are required to be members of the self-regulatory organization, the Investment Industry Regulatory Organization of Canada (IIROC);
  • Mutual fund dealers are restricted to dealing in prospectus qualified mutual funds and are required to be members of the self-regulatory organization, the Mutual Funds Dealers Association of Canada (MFDA); and
  • Scholarship plan dealers which are restricted to trading only in scholarship plans and educational trusts;
  • Restricted dealers – are specialized dealers restricted to a particular product.

Why work with an EMD?

Owner–operated companies, established private and public companies, and companies with requirements beyond bank, credit or ‘friends and family’ financing will value the expertise of an Exempt Market Dealer (EMD).

Peace of Mind

By ensuring your financial experts are registered as an EMD, you can trust they are appropriately regulated and managed by securities professionals who adhere to high standard of compliance and client service. EMDs are accountable for their compliance practices and acting in good faith and in the best interests of their clients.

Proficiency

Registrants of an EMD must pass a series of exams to ensure proficiency. In addition, compliance rules are in place to ensure that a strict code of conduct and proper client processes are followed to ensure fair and transparent service. Also, EMDs must file audited financial statements, and maintain minimum levels of capital and insurance.

Best Practices Ensured

The conduct of the EMD is set by regulation and the EMD must earn a license. EMDs are subject to proficiency, capital and operational requirements. EMDs are required by law to have audited financial statements, a minimum of $50,000 working capital, and periodic statements to clients if there are transactions undertaken on their behalf, as well as insurance in place to cover a wide range of client issues.

Broader Capabilities

The EMD offers a pool of sophisticated investors and minimizes many of the complicated and expensive requirements of the public equity markets. EMDs are experts in in the purchase and sale of exempt market securities and often specialize in raising capital in particular industries: real estate, construction, mining, oil & gas, food technology, biotechnology, manufacturing, etc. EMDs are allowed to offer clients a far wider range of financial opportunities than a financial adviser doing M&A or sale of companies.

Dispute Resolution Mechanism

If there is an issue with the financial adviser, there is an independent dispute resolution option available. This ensures that any client complaints are resolved by independent industry experts focused on a win/win solution.