Nick Wright, BA JD MBA LLM (Tax)

Wright Business Law

Any private fund that is raising capital in Canada relies on prospectus exemptions under National Instrument 45-106 ‘Prospectus Exemptions’. When a fund distributes securities in reliance on prospectus exemptions listed in section 6.1 of NI 45-106, such as the Accredited Investor exemption, the minimum amount investment exemption, or the Offering Memorandum (OM) exemption, it must file a Form 45-106F1 ‘Report of Exempt Distribution’ with the relevant securities regulator(s). This form remains a cornerstone of exempt market reporting, and failures or delays can trigger late fees, compliance reviews, or regulatory scrutiny.

The obligation to file Form 45-106F1 is more nuanced than many new issuers or fund managers assume. Determining the ‘date of distribution’, understanding how continuous offerings work, managing multi-jurisdiction filings, and avoiding common data-entry pitfalls all require careful attention. Properly completing and filing the form is not simply a clerical exercise. It is an attestation of compliance that regulators routinely use in a regulatory review.

The filing requirement arises within the prospectus regime established by the Securities Act (Ontario). The Act imposes the prospectus requirement for distributions of securities, subject to available exemptions. Prospectus exemptions relied upon in the exempt market are implemented primarily through rules adopted by the Ontario Securities Commission (OSC) under its rule making authority in s. 143 of the Securities Act.

National Instrument 45-106 ‘Prospectus Exemptions’ is adopted in Ontario as an OSC rule under that authority and forms part of the legally binding regulatory framework governing exempt distributions. Section 6.1 of NI 45-106 requires an issuer or underwriter relying on specified prospectus exemptions to file a report of exempt distribution.

The report must be filed in Form 45-106F1, which is incorporated into NI 45-106 and operates as the standardized reporting instrument used by Canadian securities regulators to monitor exempt market activity across CSA jurisdictions.

The prospectus exemptions in National Instrument 45-106 ‘Prospectus Exemptions’ and the associated Form 45-106F1 have been adopted in each Canadian securities jurisdiction. Reports of exempt distribution required under NI 45-106 must be filed electronically through SEDAR+, which operates as the centralized filing system used by the Canadian securities regulators. The system transmits filings to the applicable provincial and territorial regulators, including the OSC. CSA Staff Notice 45-308 (Revised), ‘Guidance for Preparing and Filing Reports of Exempt Distribution under National Instrument 45-106 Prospectus Exemptions’, provides additional regulatory guidance on the preparation and filing of these reports.

The rationale behind Form 45-106F1 is regulatory visibility. Exempt distributions are not subject to prospectus review, so the form operates as the primary dataset for regulators monitoring the exempt market’s size, risk exposure, and capital flows. It also serves as a compliance checkpoint, allowing regulators to identify patterns suggesting improper reliance on exemptions or unregistered dealer activity.

Definitions & Thresholds

When applicable, the obligation to file Form 45-106F1 arises whenever there is a “distribution” under securities legislation. “Distribution” is defined in Securities Act (Ontario), s. 1(1) and varies slightly across jurisdictions, but for fund sponsors it typically means the issuance of partnership interests, trust units, or shares in connection with capital commitments or capital calls.

The date of distribution is the legal anchor for the filing deadline. Under NI 45-106, s. 6.2, the form must be filed within 10 days after the distribution. The ‘distribution date’ depends on the structure:

• In a capital call model, each drawdown that results in the issuance of securities may constitute a new distribution.
• In a single-close fundraise, the initial closing generally sets the distribution date.
• In rolling subscriptions, each formal acceptance of a subscription may constitute a distribution.

Form 45-106F1 contains several investor-level data fields, including category of exemption, jurisdiction of purchaser and whether the purchaser is an individual. Thresholds relevant to exemptions such as accredited investor income and asset tests, or the $150,000 minimum amount requirement must be embedded into onboarding processes so the form can be completed accurately.

Application in Practice

In practice, filing Form 45-106F1 begins with identifying the relevant distribution events. Once a closing occurs, the issuer must compile information about each investor to complete Schedule 1 to Form 45-106F1, including their full legal name, address and exemption category. For continuous offerings, sponsors must maintain a running ledger of distributions and close out each 10-day filing window promptly.

The form must be filed electronically with the prescribed fee. At the time of writing, the Ontario activity fee for filing a report of exempt distribution is $350. Where a closing includes distributions in multiple provinces, total filing fees can exceed $1,000. In Ontario, late fees also accrue at the rate of $100 per day up to $5,000 in aggregate per year. Note that these fees are accurate at the time of writing but can expect to be periodically increased. For current numbers for Ontario filings see: OSC Rule 13-502, App. F, Item B.2 (Activity fees) and OSC Rule Part 9 and App. G, Item B (Late fees).

Electronic signatures are accepted. Errors such as incomplete exemption categories, or mislabelled investor types can lead to rejection. Once accepted, a confirmation is issued, which should be retained with other compliance records.

Grey Areas & Regulator Focus

One long-standing grey area concerns determining the true “date of distribution.” In practice, regulators have taken the view that the date securities are “issued”, i.e., when the issuer becomes contractually bound to deliver securities to the purchaser, is the operative date. For limited partnerships, this often coincides with the acceptance of the subscription or execution of an LP admission resolution. Waiting until funds are wired or capital is drawn can result in late filings. OSC reviews have identified late Form 45-106F1 filings as a common deficiency.

Another area of focus is the accuracy of exemption categorisation. Misclassifying an investor such as marking the Accredited Investor exemption when the minimum amount exemption was actually used can attract scrutiny. Regulators may compare filed categories with the investor’s profile, and inconsistencies can trigger inquiries.

Regulators may also examine whether individual accredited investors are being over-reported under income or financial asset categories without proper verification. While verification is not explicitly required for all investors, reliance on implausible or unsupported certifications is a recurring compliance concern.

Dealer registration concerns often connect back to Form 45-106F1. Filing patterns that suggest widespread public solicitation or high volumes of individual investors can raise questions about whether the issuer is engaging in registerable dealing activities under NI 31-103 ‘Registration Requirements, Exemptions and Ongoing Registrant Obligations’. Regulators frequently initiate compliance reviews based on these filings.

Interactions with Adjacent Regimes

Form 45-106F1 does not operate in isolation. The report of exempt distribution under NI 45-106 interacts with adjacent regimes governing registrant activity and investment fund disclosure. Information reported in the form allows regulators to assess registration status or reliance on exemptions under NI 31-103 and to cross reference registrant information maintained under NI 33-109 ‘Registration Information’. For investment funds subject to NI 81-106 ‘Investment Fund Continuous Disclosure’, this reporting also sits alongside the continuous disclosure framework under NI 81-106, which primarily applies to reporting issuer (public) investment funds.

For funds using the NI 45-106, s. 2.9 OM exemption, Form 45-106F1 plays a dual role: it reports the distribution and signals to the regulator whether the issuer is also subject to ongoing OM-based reporting requirements, including annual audited financial statements and OM filing requirements. Regulators use the form to track whether these other materials are being filed.

Certain funds structured as (primarily reporting issuer) investment funds may intersect with NI 81-106. Although most private funds avoid reporting issuer status, Form 45-106F1 filings allow regulators to identify outliers whose scale or investor profile may warrant deeper examination.

Cross-border fundraising adds complexity. Distributions to U.S. investors under Regulation D remain Canadian distributions if the issuer is in Canada or selling into Canada. If an investor is located in the U.S. but the distribution is made from Canada, the question becomes whether Form 45-106F1 is required. Canadian regulators generally apply a location-of-purchaser approach. A Form 45-106F1 filing obligation arises when there is a distribution to a purchaser resident in a Canadian jurisdiction. Distributions solely to purchasers outside Canada generally do not trigger the filing requirement, although mixed closings involving both Canadian and non-Canadian purchasers must still be reported where Canadian purchasers are included. Complex scenarios such as investors with dual residency or investments routed through Canadian entities require careful analysis.

Illustrative Scenarios

Consider a private equity fund conducting quarterly closings. Each closing represents a separate distribution requiring a Form 45-106F1. The fund accepts several subscriptions on March 31. Although capital will not be drawn until May, the distribution date is March 31 because that is when the fund admitted the subscribers. Filing on the basis of the May drawdown would likely be considered late, exposing the issuer to late fees and potential compliance review.

In another scenario, a venture fund markets broadly to angel groups across Canada. Many investors invest $25,000–$50,000 relying on the OM exemption in Alberta and British Columbia but others rely on the Accredited Investor exemption in Ontario. Because each investor may rely on a different exemption in each province, the Form 45-106F1 filing requires careful categorisation. Regulators may scrutinise how the issuer complied with OM exemption investor limits in provinces where they apply.

Compliance Checklist

A strong compliance framework for Form 45-106F1 begins with integrating regulatory timelines into the fund’s closing calendar. Once a subscription is approved, sponsors should immediately calculate the filing deadline and begin collating investor data. A centralised investor onboarding system that captures exemption categories, beneficial ownership details, and jurisdictional information minimises downstream filing issues. Before submission, the form should undergo legal review to ensure that investor categories align with documented evidence and that the distribution date is correct. After filing, confirmations should be saved in the fund’s compliance repository, and fee payments should be reconciled. Regular audits of Form 45-106F1 filings for continuous offerings can prevent systemic errors from accumulating.

What’s Changing

CSA regulators continue to review the exempt market reporting framework surrounding Form 45-106F1, with a focus on improving the quality and consistency of exempt market data. The migration of exempt distribution reporting to the SEDAR+ platform has exposed operational inconsistencies in multi-jurisdictional filing practices and prompted further work by the CSA to harmonize reporting processes. Regulators are also examining how Form 45-106F1 data can be used more effectively for market oversight, including monitoring registrant participation under NI 31-103. At the same time, jurisdiction specific requirements continue to affect national offerings, including French language requirements for Quebec.

Conclusion & Next Steps

Form 45-106F1 is more than a procedural filing, it is a regulatory touchpoint that shapes a fund’s compliance profile. By understanding exactly when filings are triggered, how to complete the form accurately, and how exemptions intersect with registration and continuous disclosure regimes, fund sponsors can significantly reduce regulatory risk. A disciplined approach integrated into the fund’s closing workflow ensures timely, accurate, and defensible filings that withstand regulatory scrutiny. As the exempt market continues to evolve, fund sponsors should revisit their processes to ensure they align with current regulatory expectations.

Book a Consultation

If you are forming, restructuring, or operating a private investment fund in Canada, contact us to schedule an initial consultation with Nick Wright.