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The Securities Act requires anyone trading securities or in the business of advising clients on securities to be registered in the province, unless a registration exemption applies. Both the firm employing the representative and the representative trading or advising in securities must be registered in New Brunswick. This requirement ensures that all registered dealers and advisers meet certain minimum standards and obtain a prescribed level of proficiency in industry related courses. 

However, it does not mean that:

• they are all equally experienced,
• they provide the same services and advice, 
• the fees they charge are the same.

There are many different types of dealers offering different products and services and specializing in different areas: 

• Large national firms 
• Small firms that operate in only one province or territory, or one city 
• Full service stock brokerage firms, registered to buy or sell a full range of securities 
• Dealers that are restricted to certain types of products such as mutual funds or scholarship plans

Some dealers offer clients a full range of trading, research and advisory services, while others specialize in providing low cost trading services for investors who are able to make their own investment decisions.

All these dealers are subject to regulation and some, but not all, are members of self-regulatory organizations and may participate in contingency funds such as the Canadian Investor Protection Fund (CIPF) or the MFDA Investor Protection Corporation (IPC). These funds are not designed to cover losses on investments but they may provide reimbursement (within limits) for cash or securities lost in the event a dealer becomes insolvent.

There are some instances that companies, also known as issuers, can sell specific investment products without being registered in New Brunswick. They rely on certain exemption rules specified in National Instrument 45-106 Prospectus and Registration Exemptions.

What Does This Mean?

In Canada, when companies issue securities such as stocks or bonds, they are generally required to file a prospectus, a document that contains material facts about both the issuer and the security. However, in certain cases, securities can be sold without a prospectus and these investments are called exempt securities. When a security is issued without a prospectus, the sale is called an exempt distribution or private placement. When an issuer sells its exempt market securities, it may choose not to use a registered dealer. This means, when you buy from an issuer, you may not get the same protection you would get when you buy from a registered dealer.

When can a security be sold under an exemption?

The preparation of a prospectus involves significant costs and time for issuers looking for capital. Securities regulations give exemptions under certain conditions: 

1. A prospectus is not required for the distribution of certain securities, including government securities and certificates of deposit guaranteed by deposit insurance.
   
2. The law enables an issuer to use a prospectus exemption if it issues securities to accredited investors. As an individual, to qualify as an accredited investor, you must have above-average income or substantial assets. National Instrument 45-106 describes in full detail the exemption criteria for accredited investors. If you are uncertain if you qualify as an accredited investor, please call the New Brunswick Securities Commission. If you are not an accredited investor or a director, officer or employee of the issuer or any of its affiliates, the issuer may not be legally entitled to sell you its securities without a prospectus.
   
   The law assumes that accredited investors can:
   - access the information needed to assess an investment without help of a prospectus; and 
   - sustain the loss of their entire investment.
   
3. An issuer can use a prospectus exemption if it delivers to the investors an offering memorandum. In such a case, you must sign a risk acknowledgment form in which you recognize that you are investing entirely at your own risk and are aware that resale restrictions may apply to the securities.
   
4. An issuer can also obtain an exemption relating to a minimum amount investment if its securities have a purchase price to the investor of more than $150,000 paid in cash.
   
5. There are several other exemptions an issuer can rely on. For information and details on exemptions, please refer to Part 2 of National Instrument 45-106 or to the Guide to Capital Raising Exemptions in New Brunswick.

If you buy an exempt security, you may not have the same legal rights as you do under a prospectus. Before buying exempt market securities, you should: determine whether the investment suits you; get advice from a trusted adviser; and do not hesitate to request information before you makes a decision.

*If you do not understand the investment, don’t invest.*

Investing your savings involves a great deal of trust:

• trust in the management of companies you invest in, and
• trust in the people who advise you and handle your investments.

However, trust should never take the place of careful research and healthy skepticism. Successful investing requires upfront and ongoing time and effort. That time and effort may be spent doing your own investment research. It should also be spent carefully selecting your financial adviser, consulting with them, and reviewing their recommendations.