What “accredited” means in Canada
The Canadian Securities Administrators (CSA) operate a securities regime where most investment offerings need a full regulatory prospectus — expensive paperwork meant to protect retail investors. Prospectus-exempt offerings skip that documentation by selling only to specific sophisticated-investor categories.
The most common exempt-investor category is the accredited investor, defined under National Instrument 45-106 (Prospectus Exemptions), which applies across all provinces and territories. The regulatory rationale: accredited investors are presumed to be financially sophisticated enough to evaluate risk, and wealthy enough to absorb losses without harm.
Once you qualify as accredited, you can buy:
- Private MICs (Mortgage Investment Corporations) — see MIC vs REIT
- Private equity funds
- Private real estate funds
- Hedge funds
- Venture capital funds
- Private placements of public-company shares
- Syndicated mortgages (see syndicated mortgages)
- Exempt-market securities generally
These offerings typically aren't available to retail investors at all.
The financial tests — full list
You qualify as an accredited investor if you meet ANY ONE of the following (paraphrased from NI 45-106 section 1.1):
Individual tests
- Net financial assets — financial assets (cash, deposits, securities) minus related liabilities, exceeding $1,000,000 alone or with spouse
- Net income — net pre-tax income exceeding $200,000 (alone) or $300,000 (combined with spouse) in each of the two most recent calendar years, with a reasonable expectation of exceeding it in the current year
- Net assets — net assets of at least $5,000,000 alone or with spouse, calculated as total assets minus total liabilities (and unlike the financial-assets test, this CAN include real estate, but excludes principal residence value above the mortgage)
Institutional and professional tests
- Registrants and Permitted Clients (registered dealers, advisers, investment fund managers)
- Banks, credit unions, insurance companies
- Pension funds
- Government and Crown corporations
- Charities under specific conditions
- Trusts and partnerships whose beneficiaries are all accredited
- Recognized education in finance (specific professional designations qualify under some interpretations)
What counts (and what doesn't) in the financial-asset test
The $1M financial-asset test is the path most Canadian individual investors qualify under. The calculation is more nuanced than people assume:
Counts as financial assets
- Cash and deposits in chequing, savings, GICs
- Public securities (stocks, bonds, ETFs, mutual funds)
- Registered account balances (TFSA, RRSP, RRIF, FHSA, RESP holdings)
- Marketable private securities
- Cash value of life insurance policies
Does NOT count as financial assets
- Your principal residence equity — most commonly missed exclusion
- Investment real estate equity — also excluded
- Private business interests that aren't marketable
- Pension entitlements that aren't commuted/transferable
- Defined benefit plan future entitlement
- Insurance death-benefit face value
A Canadian household with $800k home equity, $300k RRSP, $200k TFSA, and $50k cash has $550,000 of financial assets — not $1.35M. The $800k home doesn't count for the financial-assets test.
What counts in the $5M net-assets test
The $5M test is more inclusive. It captures total assets minus total liabilities:
- All real estate equity (including principal residence, though some interpretations cap principal-residence equity)
- All investment portfolios
- All private business interests
- All personal property of significant value
For most middle-class Canadians, the $1M financial-asset test is more attainable than the $5M net-asset test because financial assets accumulate steadily via RRSP/TFSA contributions while net assets are heavily tied to home value.
Why it matters — what status unlocks
Once accredited, the universe of available investments expands meaningfully:
Private mortgage investment
- Conservative private MICs targeting 7-9% yields with first-mortgage focus
- Aggressive private MICs targeting 10-12% yields with alt-A or second-mortgage focus
- Syndicated mortgage participations in individual loans
Private real estate
- Private REITs without daily liquidity but with stable NAV
- Real estate limited partnerships
- Development-stage equity opportunities
Other private markets
- Venture capital + growth equity
- Private equity buyout funds
- Hedge funds and absolute-return strategies
- Private placement IPOs
The yield premium on private vs public is typically 100-400 bps — partly compensation for illiquidity, partly because the manager isn't paying for prospectus compliance.
How status is verified
Most exempt-market dealers require:
- Accredited Investor Certificate signed at subscription — you certify the basis for your status
- Recent CRA Notice of Assessment confirming income (for the income test)
- Bank or brokerage statements confirming financial assets (for the asset test)
- Professional credentials if relying on registrant / permitted-client status
- Independent confirmation for high-stakes investments — sometimes a CPA letter
Some private deals will also conduct independent due diligence on your financial position before accepting the subscription.
Recertification — status isn't permanent
Accreditation is recertified at every new investment, and most funds require annual recertification for existing investors:
- If your financial assets drop below $1M after a market downturn or major expense, you cannot ADD to existing holdings
- Existing holdings are typically grandfathered, but the fund may restrict your participation in new offerings
- Re-qualifying after a temporary drop is straightforward once you cross back over the threshold
Alternative paths to private offerings
If you don't qualify as accredited, you may still access exempt-market offerings under other exemptions:
Family, Friends, and Business Associates (FFBA)
You can invest in private offerings of companies where the issuer is a family member, close friend, or close business associate. This is how many small private deals get funded — friends and family rounds, etc.
Eligible Investor (Offering Memorandum Exemption)
In some provinces (BC, AB, SK, MB, NB, NS, NL, NT, YT, NU), there's an “Eligible Investor” category with lower thresholds ($75,000 net income or $400,000 net assets) that can buy offerings backed by an offering memorandum. Limits apply ($30,000 per year unless eligibility advice is obtained).
Crowdfunding exemption
Limited crowdfunding offerings allow small investments by non-accredited investors with hard caps (typically $2,500 per offering, $10,000 per year per issuer).
For most private MIC and real estate investing, accredited or the OM exemption are the practical paths.
Common accredited-investor mistakes
- Counting principal residence equity in the $1M financial-asset test — most common error
- Counting RRSP at face value when calculating future tax liability — RRSP value is pre-tax; the after-tax value is 25-43% lower
- Not maintaining documentation for the income test (NOAs for 2 prior years AND current year projection)
- Misclassifying private business interest as a financial asset
- Spouse aggregation confusion — financial assets and income can usually be combined with spouse, but you both need to sign as accredited investors
- Recertifying late — if you don't respond to the fund's annual recertification request, your participation in new offerings may be restricted
What to do next
- Calculate your financial assets (excluding home equity, excluding non-marketable private business interest)
- Check your last 2 years of NOAs to confirm income test
- If you qualify, identify 1-2 private MICs or REITs you want to evaluate
- Use 10 questions to ask a MIC manager before subscribing
- Run private mortgage risks as a checklist
- Start small (5% of intended allocation) and scale after 12 months of experience
Accredited status opens doors but doesn't guarantee outcomes. The same diligence you'd apply to a public investment matters more — not less — in private markets.