Master of Laws




Alan Miller


This paper takes a legal-economic approach in assessing the current accredited investor standard that exists as part of Canada’s securities laws. An accredited investor is often characterized as an individual that, due to his or her wealth, may participate in certain investment opportunities that would otherwise not be available. Canada’s National Instrument 45-106 views accredited investors as those with a unique ability to understand financial markets, and due to this level of understanding, the typical disclosure protections afforded to the public—mainly, the prospectus—are not necessary to these individuals.

A legal-economic approach to the accredited investor standard looks at the system as constant balance between the benefits enjoyed by those in a position to benefit most from the law as constructed, versus those that are harmed by it. The efficient construction of a law is one that benefits everyone and harms no one. While this is entirely unrealistic to achieve in contemporary society, the goal of any regime should be to come as close to realizing the efficient system as possible—greatest benefits to least amount of harms.

This analysis begins by examining the history of the law and its underlying purpose in order to theorize a perfectly efficient ‘ideal system’. How does Canada’s system compare? The analysis takes issue with the current structure of the law, noting that the benefits-to-harms ratio may not be as efficient as is feasible. A better regulatory approach would consider placing less emphasis on wealth as the sole proxy for accreditation. The analysis ends with a list of proposed amendments aimed at increasing the benefits of the system, while decreasing harms as a push toward a more efficient Canadian securities law regime.