Resources Quarterly - WINTER 2013 - page 9

Top five things to know when reading an OM:
1. Does the document describe in detail the
business plan, structure and purpose.
2. Independently verify information by seek-
ing 3rd party advice i.e. talk to a securities
lawyer or your accountant.
3. Be wary of forward looking information
– keep in mind expectations are not guar-
anteed. Understand what the business is
offering for a return on your investment.
Remember that these types of investments
are illiquid and some are subject to holding
periods up to five years. It’s is important to
be prepared for the high level of risk.
4. Based on your reading is management ca-
pable of running the business and executing
the “proposed use of funds”. Ask: How are
they going to use the funds they raise, how
much experience do the managers have
running a business?
5. Make sure you receive and understand the
financial statements.
The key thing to remember is that securities is-
sued under prospectus exemptions do not trade on
a public stock exchange so an investor may not be
able to resell them.
The exempt market may not be for everyone, but
if you are a start-up business looking to raise capi-
tal, or you’re an investor looking for a new invest-
ment opportunity, it just might be for you.
For further information on private placement
markets check our Raising Capital for Small Mid-
size Business handbook, or visit our website:
Note:The information presented in this article does
not represent the opinion of the Nova Scotia Securities
Commission or its staff and should not be relied upon
as legal advice. Individuals and organizations that
are interested in the exempt market should obtain
legal advice prior to any capital raising activities.
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