Different Categories of Investors
In Canada, securities regulations establish a distinction between accredited investors and retail investors, based on their income, net worth, and investment experience. Here is a comparative table outlining the differences between these two types of investors:
|Criteria||Accredited Investor||Retail Investor|
|Minimum annual income||$200 000 ou $300 000 as a couple||no revenu minimum|
|Minimum net worth||$1 000 000 (including the primary residence)||No minimum net worth|
|Experience in investment/asset management||Financial work experience or professional certification||no specific requirement|
|Financial access to investments||Access to investments that may not be offered to the general public||limited access to certain types of investments|
|Regulation||N/A||Increased/Enhanced regulatory protection for regular investors|
In Canada, a qualified investor typically has a high income, significant net worth, and some investment experience, which allows them to access a greater variety of investments, including some that are not offered to the general public. On the other hand, regular investors benefit from increased regulatory protection to ensure they are better informed about the risks associated with investments.
Why such a distinction?
The distinction between accredited investors and retail investors is established in Canadian securities regulations. It is based on the principle that investors with more experience and financial resources can better understand and evaluate the risks associated with more complex and sophisticated investments.
Accredited investors are considered to have greater financial expertise and higher financial capacity to withstand potential losses. They have access to a wider range of financial products that may be riskier or more complex than those offered to retail investors.
On the other hand, retail investors, who have less investment experience and more modest financial means, are considered more vulnerable to investment risks. To protect these investors, Canadian securities regulations impose stricter rules on brokers and financial advisors working with retail investors.
For example, brokers must ensure that the financial products offered are suitable for the profile of the retail investor in terms of their level of knowledge, risk tolerance, and financial needs. Additionally, retail investors also benefit from increased legal protections, such as stricter disclosure rules, which provide them with more comprehensive and clear information about the offered financial products.
In summary, the distinction between accredited investors and retail investors aims to better protect investors by establishing different rules for each group. Accredited investors have access to more sophisticated financial products, while retail investors benefit from enhanced protection rules to mitigate the risks they face.