For many Canadians looking to expand their investment horizons, becoming an accredited investor opens doors to exclusive opportunities not available to the general public. But what exactly does this designation mean, who qualifies, and is it worth pursuing? This comprehensive guide breaks down everything you need to know about accredited investor status in Canada.
Money.ca takeaways
- An accredited investor in Canada is someone who meets income, asset, or net worth thresholds set by Canadian securities regulators under National Instrument 45-106.
- You can qualify if you earn over $200,000 annually (or $300,000 with a spouse), own $1 million+ in financial assets, or have $5 million in net assets.
- Accredited investors gain access to private market investments like venture capital, private real estate, hedge funds, and Mortgage Investment Corporations (MICs).
- There’s no formal certification process. Instead, investment platforms verify your status through documentation like tax returns, financial statements, or letters from accountants or lawyers.
What is an accredited investor in Canada?
An accredited investor in Canada is an individual or entity that meets specific financial criteria established by securities regulators. This criteria designation allows access to investments in the private market that aren't available to the general public.
Unlike public markets where anyone can buy stocks on the TSX, private markets operate under different rules. They're exempt from many disclosure requirements that protect typical retail investors, allowing companies and investment funds to raise capital with less regulatory burden.
Some common investments exclusive to accredited investors include:
- Hedge funds that use sophisticated strategies like short selling or derivatives
- Private equity funds that invest directly in private companies
- Real estate limited partnerships offering direct ownership in commercial properties
- Private placements of securities before companies go public
The Canadian government restricts these investments to accredited investors for protection. Since these opportunities often involve higher risk, less disclosure, and limited liquidity, regulators want to ensure investors can both understand the risks and withstand potential losses.
Who qualifies as an accredited investor?
Canada's National Instrument 45-106 outlines specific criteria to determine accredited investor status. You may qualify through any of these pathways:
- Income test: You've earned more than $200,000 individually (or $300,000 combined with a spouse) in each of the past two years, with reasonable expectation of maintaining this income level
- Financial assets test: You own financial assets (cash, securities, deposits, etc.) exceeding $1 million before taxes, alone or with a spouse
- Net worth test: You have net assets of at least $5 million, alone or with a spouse
Important note: Your primary residence does not count toward the financial assets test, though it does factor into the net worth calculation.
- Corporations, trusts, or partnerships with net assets exceeding $5 million
- Registered financial institutions and insurance companies
- Registered advisers acting on behalf of fully managed accounts
- Pension funds with assets exceeding $5 million
Self-assessment checklist:
- Do you consistently earn over $200,000 annually ($300,000 with spouse)?
- Do your investment assets exceed $1 million (excluding your home)?
- Is your total net worth above $5 million?
- Are you a director or executive of the issuing company?
If you answered yes to any of these questions, you likely qualify as an accredited investor under Canadian securities law. For the official regulatory definition, you can consult the National Instrument 45-106 on the Ontario Securities Commission website or your provincial securities regulator.
How to prove you're accredited (even though there's no official process)
Unlike professional designations like CPA or CFA, there is no certificate or governmental body that officially "grants" accredited investor status. Instead, investment platforms and issuers must verify that investors meet the requirements before allowing participation in exempt offerings.
When you want to invest in opportunities limited to accredited investors, expect to provide documentation such as:
- Recent tax returns (T1 General) showing income levels
- Investment account statements proving financial asset values
- Bank statements and mortgage documents
- Property assessments for real estate holdings
- A letter from a registered accountant or lawyer confirming your status
Investment platforms will typically require completion of Know Your Client (KYC) forms and suitability questionnaires to assess both your accredited status and whether particular investments match your risk profile and investment objectives.
For the most straightforward verification process, consider working with a registered exempt market dealer or investment advisor who regularly deals with accredited investors. They can guide you through the documentation process and help identify appropriate investment opportunities.
Pros and cons of being an accredited investor
Pros
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Access to exclusive investments with potentially higher returns
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Greater diversification beyond traditional stocks and bonds
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Early-stage opportunities in promising companies before they go public
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Inflation-resistant alternative assets like private real estate or infrastructure
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Tax advantages through certain investment structures
Cons
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High investment minimums often starting at $25,000 to $100,000
-
Limited liquidity with lock-up periods ranging from 1to10+ years
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Fewer investor protections and disclosure requirements
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Complex fee structures including management fees and performance fees
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Higher due diligence burden with less transparent information
Being an accredited investor isn't necessarily beneficial for everyone who qualifies. The investments available often require substantial capital commitments, sophisticated understanding of complex financial instruments, and tolerance for illiquidity.
For example, venture capital funds typically lock up investor money for 7-10 years, while hedge funds might charge "2 and 20" fee structures (2% annual management fee plus 20% of profits). These characteristics make such investments inappropriate for many investors, regardless of their financial status.
Investment opportunities for accredited Investors in Canada
Once you qualify as an accredited investor, numerous investment avenues become available:
Private placements and angel investing: Invest directly in early-stage private companies
- Typical minimum: $10,000 to $50,000
- Potential returns: Highly variable (0-10x+ initial investment)
- Platforms: FrontFundr, AngelList Canada
Hedge funds and venture capital: Professional management of alternative strategies
- Typical minimum: $100,000 to $500,000
- Potential returns: 8-15% annually for hedge funds; venture capital varies widely
- Notable Canadian options: Polar Asset Management, Georgian Partners
Private equity real estate: Direct ownership stakes in commercial properties
- Typical minimum: $25,000 to $100,000
- Potential returns: 8-12% annually including appreciation and income
- Platforms: Parvis, Addy, Equiton
Mortgage Investment Corporations (MICs): Private lending pools providing mortgages to borrowers
- Typical minimum: $10,000-$25,000
- Potential returns: 6-10% annual income
- Options: Amur Capital, CMI MIC, Atrium MIC
Alternative Investments: Farmland, infrastructure, royalty funds, private credit
- Typical minimum: Varies widely ($10,000-$250,000)
- Potential returns: 7-15% depending on sector and risk profile
- Platforms: AGinvest (farmland), OurCrowd (tech), Sagard (private credit)
Each opportunity offers different risk-return profiles, with minimums and liquidity terms varying significantly. Before committing capital, thoroughly research each option and consider consulting a financial advisor who specializes in alternative investments.
Don't qualify? Here's what to invest in instead
Not meeting accredited investor criteria doesn't mean missing out on solid investment returns. Many excellent options remain available:
Public market alternatives:
- Robo-advisors like Wealthsimple or Questwealth for low-cost diversified portfolios
- Publicly traded REITs offering real estate exposure (e.g., RioCan, Granite)
- ETFs focused on dividends or specific sectors (iShares, Vanguard, BMO)
- Retail-accessible mortgage investment corporations (MICs) that offer similar yields to private options
Fractional ownership platforms:
- BuyProperly and addy offer real estate investment with minimums as low as $1
- FrontFundr features some private placements open to non-accredited investors
- Wealthsimple, Questrade and Interactive Brokers provide fractional shares in U.S. stocks
Alternative banking products:
- EQ Bank and other online banks offer competitive high-interest savings accounts
- Credit union investment shares sometimes yield higher than market GICs
Many investment strategies that deliver strong long-term returns don't require accredited status. A well-constructed portfolio of low-cost ETFs can provide excellent diversification and growth potential with better liquidity and lower fees than many exclusive investments.
Final thoughts: Should you become an accredited investor?
Achieving accredited investor status is not a goal in itself but rather a checkpoint that enables access to a broader investment universe. The designation opens doors, but doesn't guarantee superior returns or automatically make the available investments suitable for your situation.
If you qualify as an accredited investor, consider these steps:
- 1 Start small: Test the private market waters with a modest allocation before making larger commitments
- 2 Conduct thorough due diligence: Private investments require more research, not less
- 3 Maintain diversification: Don't concentrate too much capital in illiquid investments
- 4 Work with professionals: Consider a wealth manager experienced in alternative investments
Remember that becoming an accredited investor gives you access to a different set of investment tools—not a shortcut to wealth. The private investments available still require careful analysis, patience, and risk management.
Before pursuing any alternative investment, speak with a qualified financial advisor who can help assess whether these opportunities align with your overall financial plan and risk tolerance. The most successful investors, accredited or not, maintain disciplined strategies aligned with their unique financial goals.
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Tyler Wade has worked in personal finance for over 5 years writing for brands like Ratehub, Forbes, KOHO, and now Money.ca.
Eric Rosenberg is a finance, travel and technology writer in Ventura, California. He is a former bank manager and corporate finance and accounting professional who left his day job in 2016 to take his online side hustle full time. He has in-depth experience writing about banking, credit cards, investing and other financial topics and is an avid travel hacker. When away from the keyboard, Eric enjoys exploring the world, flying small airplanes, discovering new craft beers and spending time with his wife and little girls.
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