Accredited
Investors
Accredited Investor is a term
defined by various securities laws.
The term generally includes wealthy individuals along
with investment firms, corporations, endowments, and
retirement plans.
Accredited Investors are permitted to invest in certain
types of higher risk investments, limited partnerships,
hedge funds, and angel investor networks.
In the United States: An individual to be considered an
accredited investor, they must have a net worth of at
least one million US dollars, or have made at least
$200,000 each year for the last two years ($300,000 with
his or her spouse if married) and have the expectation
to make the same amount this year
In Canada: The same prerequisites apply, however one's
net worth must be a minimum of one million dollars not
including the value of their principal residence.
As defined by the U.S. Securities and
Exchange Commission:
Under the Securities Act of 1933, a company that
offers or sells its securities must register the
securities with the SEC or find an exemption from the
registration requirements. The Act provides companies
with a number of exemptions. For some of the exemptions,
such as rules
505
and
506
of
Regulation D,
a company may sell its securities to what are known as
"accredited investors."
The federal securities laws define the term
accredited investor in
Rule 501 of Regulation D
as:
-
a bank, insurance company, registered
investment company, business development company, or
small business investment company;
-
an employee benefit plan, within the meaning of
the Employee Retirement Income Security Act, if a
bank, insurance company, or registered investment
adviser makes the investment decisions, or if the
plan has total assets in excess of $5 million;
-
a charitable organization, corporation, or
partnership with assets exceeding $5 million;
-
a director, executive officer, or general
partner of the company selling the securities;
-
a business in which all the equity owners are
accredited investors;
-
a natural person who has individual net worth,
or joint net worth with the person’s spouse, that
exceeds $1 million at the time of the purchase;
-
a natural person with income exceeding $200,000
in each of the two most recent years or joint income
with a spouse exceeding $300,000 for those years and
a reasonable expectation of the same income level in
the current year; or
-
a trust with assets in excess of $5 million,
not formed to acquire the securities offered, whose
purchases a sophisticated person makes.
For more information about the SEC’s
registration requirements and common exemptions, read
the brochure,
Q&A:
Small Business & the SEC.
http://www.sec.gov/answers/accred.htm
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We have provided this information as a service to
investors. It is neither a legal interpretation nor
a statement of SEC policy. If you have questions
concerning the meaning or application of a
particular law or rule, please consult with an
attorney who specializes in securities law. |
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