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.”
Federal securities law defines the term Accredited Investor under Title 17, Section 230.500, 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 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
- a trust with assets in excess of $5 million, not formed to acquire the securities offered, whose purchases a sophisticated person makes.
This information is presented 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 an attorney specializing in securities law.
Wax Ink is comprised of individual investors, NOT licensed or registered with ANY government agency. Please obtain the advice of a registered investment professional BEFORE considering any information obtained from this site.
