Mortgage Investment Companies & Individual Investors

Mortgage-Investment-Company-RulesWith investors tiring of 2-4% fixed income returns, Mortgage Investment Companies (MICs) have been attracting more assets.

People are finding that certain reputable MICs have a long history of strong inflation-adjusted returns. (See: Inside Mortgage Investment Corporations.)

Yet, not everyone can invest in a MIC. And, those who can sometimes run into regulatory limits.

For insight into the rules surrounding MIC investing, we spoke with Jeremy Farr, a partner at Borden Ladner Gervais, a MIC specialist and corporate lawyer of 27 years.

“Shares in a MIC are securities and regulators have stipulations on who can buy them,” says Farr.

Generally, people in any province can buy MIC shares if they meet certain criteria, he notes. Those criteria are spelled out in two exemptions:

The accredited investor exemption

  • The investor’s income must be $200,000 in each of the last 3 years, including the current year; OR,
  • The investor’s and spouse’s income must be $300,000 combined in each of the last 3 years, including the current year; OR,
  • The investor’s net financial assets (i.e., non-real estate assets – liabilities) is $1 million or more.

The “accredited investor” declaration is made by the investor himself/herself on the “honour system,” says Farr.

The minimum investment exemption

  • Anyone can purchase MIC shares if their initial purchase is at least $150,000.
  • Subsequent purchases can be less than $150,000.

On top of the two provisions above, individual provinces have additional exemptions that allow individual investors to purchase MICs.

For residents of BC, NB, NS and NFLD

  • Investors can generally buy MIC shares in any amount as long as they receive an “offering memorandum” from the MIC.
  • An offering memorandum is basically a detailed disclosure document. Among other things, it outlines a MIC’s risks, management, terms and objectives.

For residents of AB, MB, SK, QC, PEI and the Territories

  • An “offering memorandum” exemption exists in these provinces as well. It allows individual investors to buy MIC shares if they:
    • Purchase less than $10,000 in a single “trade;” OR,
    • Have net assets (housing assets + non-housing assets – liabilities) over $400,000; OR,
    • The investor’s income is $75,000 in each of the last 3 years, including the current year; OR,
    • The investor’s and spouses income is $125,000 combined on each of the last 3 years, including the current year.

For residents of Ontario

  • No other exemptions exist for the typical individual investor, apart from the accredited investor and minimum investment exemptions described above.

For purchases of publicly traded MICs

  • Anyone in any province can invest in publicly traded MICs.
  • Here’s an article about publicly traded MICs from Canadian Capitalist.

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We should remind everyone that this is not investment or legal advice. Nor is it a definitive/exhaustive list of regulations. As a result, investors should consult with a licensed investment advisor before purchasing a MIC or acting on any MIC information online.

Also, as a point of interest, the rules governing purchases of MIC shares are largely based on where the purchaser lives. For example, a British Columbia MIC (with no physical presence in Ontario) that sells shares to an individual investor residing in Ontario, would still need to ensure that investor met Ontario’s accredited investor and/or minimum purchase requirements.

Regulations aside, MICs are a compelling investment class. Just ensure you do lots of due diligence. One of the best checklists for MIC purchases is still this one put out by Wayne Strandlund of Fisgard Capital Corporation.


Sidebar:  We’d like to thank Jeremy Farr for all of his guidance with the above rules. Mr. Farr specializes in securities and technology law and is a prominent expert in the field of Mortgage Investment Companies. He also serves as a Director of Evergreen Mortgage Corp. Contact link


Rob McLister, CMT

  1. Sucks to live in Ontario. I love it when the government tells me I’m too stupid to understand an investment so I need to buy $150,000 of it to be considered rational.
    I may have to move and live with the smart people in BC, NB, NS or NF.

  2. Government regulation is there to protect people from illegal or shady business practices since it sucks more when a person invests in a shady investments and lose their life’s savings. Just ask investors for the defunct, Concrete Equities!

  3. Thanks for the mention Rob. I think there are a couple of things that IMO favour publicly-listed MICs: (1) Investors can buy into in any amounts. (2) Due to market volatility, investors have the opportunity to pick up MICs at lower prices. (3) I personally prefer the disclosure that goes with public listings.

  4. CC, I fear you compare apples to oranges. Private MICs offered under OM are attractive to investors for their lack of volatility through preservation of capital(albeit there are other risks) . Private MICs are a viable option to GICs and other fixed income securities because they pay higher interest rates while invested capital holds firm at the invested amount. Publicly-listed MICs defeat the purpose [of avoiding market volatility] – even though some are arguably better managed and have better returns. Fact is that publicly listed MICs roll with the markets, are volatile, and therefore must be compared to equity investments… Sandy.
    P.S. EMD Rules totally suck for investors resident in Ontario (i.e. everyone with a mortgage).

  5. The Ontario government doesn’t prevent people from losing their life savings in Nortel. Why should it interfere with them buying a good MIC? If you’re going to regulate anyone, regulate the MICs themselves. Don’t interfere with people’s ability to pick good investments for their retirement.

  6. Just because a MIC is private doesn’t mean it is not volatile. You just don’t see it because you don’t have a market that is constantly pricing the security. Just check the risks section of any private MIC. At least with public MICs you can sell at anytime. Private MICs are not as liquid.

  7. I agree that private MICs have a much different risk profile and are less liquid. Often, the purpose of the private MIC is to offer a security where the investors original capital is preserved simply because there is no market to price the security. But, like you say, there are other risks..

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