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.