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PLEASE NOTE. THIS ARTICLE REFERS TO RULES AND REGULATIONS WHICH HAVE BEEN AMENDED SINCE ITS PUBLICATION. WE PRESENT THIS AS A HISTORIC DOCUMENT, NOT TO BE RELIED UPON. QUESTIONS? EMAIL US AT QUESTIONS@SECLAW.COM. FOR CURRENT INFORMATION, SEE http://www.seclaw.com/wp/welcome/accredited-investor-definition/

Accredited Investors

The securities laws and rules have a number of defined terms. Accredited Investor is one of those terms.

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 contained in Regulation D a company may sell its securities to what are known as "accredited investors."

The federal securities laws define the term accredited investor inRule 501 of Regulation D. While we often speak of accredited investors as individuals who have an income in excess of $200,000 or a net worth in excess of one million dollars, the full definition is as follows:

  1. a bank, insurance company, registered investment company, business development company, or small business investment company;

  2.   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;

  3. a charitable organization, corporation, or partnership with assets exceeding $5 million;

  4. a director, executive officer, or general partner of the company selling the securities;

  5. a business in which all the equity owners are accredited investors;

  6. 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;

  7. 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

  8. a trust with assets in excess of $5 million, not formed to acquire the securities offered, whose purchases a sophisticated person makes.


 


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Nothing herein is intended as legal or financial advice. The law is different in different jurisdictions, and the facts of a particular matter can change the application of the law. Please consult an attorney or your financial advisor before acting upon the information contained in this article.SECLaw.com was created by and is sponsored by Mark J. Astarita, Esq., a securities attorney and partner in the law firm of Sallah Astarita & Cox, LLC, who represents all participants in the financial markets. Mr. Astarita can be contacted by email at mja@sallahlaw.com.

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