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Investing Defined > Accredited Investors
Accredited
Investors
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 our brochure,
Q&A: Small Business & the SEC.
http://www.sec.gov/answers/accred.htm |
