One of the questions I asked in my accredited investor post is whether the current definition of accredited investor is fair or not. An accredited investor in the United States is a person or applicable entity that meets certain financial or sophistication criteria that should, in most cases, allow such an investor to absorb or anticipate a complete loss related to an investment. I've noticed a lot of platforms don't even bother confirming except for a little "You have big net worth, right?" The disclosure requirements ease considerably if your financing is for less than $1,000,000. First, any non-accredited investor must have “such knowledge and experience in financial and business matters that he is capable of evaluating the merits and risks of the prospective investment.” Rule 506(c) Accredited Investor Verification Safe Harbors . Non-traded REITs that are registered with the SEC also must regularly file quarterly and annual reports detailing the financial results of the non-traded REIT. Background. Penalty for lying about being an accredited investor? People must feel the … But that doesn’t mean your company should raise capital from non-accredited investors, and for … A non-accredited investor is any investor who does not meet the income or net worth requirements set out by the Securities and Exchange Commission (SEC). The SEC doesn't care if you, as a non-accredited investor, buy something. These reports can be found on the SEC’s EDGAR database and are identified as a Form 10-Q for a quarterly report and a Form 10-K for an annual report. While you may not qualify for all real estate crowdfunding companies as a non-accredited investor, there are some crowdfunding sites you can find that welcome non-accredited investors. ... but imperative that the analysis of a pre-existing personal or business relationship and financial experience of the non-accredited investor be analyzed with the assistance of legal counsel. A syndicate is where you invest with a lead investor (syndicate lead) and pay them a deal carry, or percentage of profits (15-25%). Accredited Investor: Everything You Need to Know Startup Law Resources Venture Capital, Financing. Only 31% of you said the definition is currently fair, while the other 8% voted the SEC should raise the income and net worth limits. The rule says that I can have up to 35 non-accredited investors.” While it is true that Rule 506(b) says you can have up to 35 non-accredited investors, it goes on to say that if you allow even 1 non-accredited investor in your round you have to comply with very detailed and comprehensive disclosure obligations. The Friends and Family Investment Round. Very frustrating to be barred from solid investments. The term accredited investor is defined in Rule 501 of Regulation D. Learn more here and here. The federal securities laws provide companies with a number of exemptions. In certain circumstances, an entity, like a business or charitable organization, may be an accredited investor, as well, but typically that entity would either need to have $5,000,000 or more in assets or be composed solely of other accredited investors. 61% of you voted that the Securities And Exchange Commission (SEC) should not dictate who can and cannot invest in private offerings. Remember that you need to be an accredited investor (net worth $1mm+ or $200k annual income) and those funds will attempt to confirm this, usually by having you attest to being one under penalty of perjury. While it is technically true that a Rule 506 offering may include up to 35 non-accredited investors, what is often missed is that it is not really practical to do so. Published on 7/7/16 10/26/18 by Doug.