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Expanding Retail Access to Private Markets is Raising Serious Questions
Canadian regulators face growing pressure – from industry and governments alike – to open private asset markets to a broader retail audience. Proponents argue that doing so would improve portfolio diversification and enhance returns. We are not opposed to innovation. But we are opposed to placing ordinary investors in products they cannot understand, value, or easily exit – particularly when there are serious failings in the safeguards designed to prevent unsuitable sales.
Liquidity Mismatch is a Structural Problem, Not Just a Theoretical Risk
Unlike institutional investors, real-life events like job loss or medical issues, which are often unforeseen and unplanned, can significantly impact the financial situations of most retail investors. Retail investors are also more likely to redeem investments during downturns, when liquidity is most likely restricted. Unfortunately, private assets, by their very nature, are not designed to meet these realities. This creates a real tension between how private assets function and retail investors’ needs.
The CSA Systemic Risk Committee's recent 2025 Annual Report on Capital Markets emphasizes the tangible risks: liquidity mismatches between private fund assets and investor redemption requests have already led to several funds halting or restricting withdrawals. This is not hypothetical. Since late 2022, Canadian investors have experienced exactly this outcome, across funds including Romspen, KingSett, Trez Capital, Centurion, and others. They all imposed restrictions on redemptions when investors needed access to their funds most.
Products that cannot reliably return investors' capital are poorly suited for the mass retail market. This reality must be at the centre of any policy discussion about widening access.
Compliance Sweeps Raise Serious Red Flags
Proponents of broader retail access to private assets contend that robust suitability and conflict‑of‑interest rules are sufficient to manage the risks. In theory, that sounds reassuring. In practice, the evidence tells a very different story.
Recent findings from the CIRO Compliance Report for 2026 and the CSA-CIR O Phase 2 CFR Sweep point to persistent and troubling weaknesses. Many dealers still struggle with core obligations: managing conflicts, knowing their clients, understanding the products they sell, and properly assessing suitability. Even though these requirements have been in force since 2021, compliance across the industry remains inconsistent and, in some cases, notably weak.
Expanding retail access to complex, opaque, and illiquid private assets assumes that these safeguards are functioning reliably and consistently. The compliance record indicates otherwise. When foundational rules are not properly implemented or enforced, the risk of unsuitable private asset products being sold to retail investors is high.
Our Position
FAIR Canada supports well-functioning capital markets and responsible innovation. But expanding retail access to private assets before investor protection rules are demonstrably and consistently enforced puts investors at risk. The policy question is straightforward: why prioritize product expansion when core safeguards are failing? Until regulators can demonstrate that suitability and conflict-of-interest obligations are working as intended, retail investors should approach these products with extreme caution – and regulators should pump the brakes.
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