The Securities and Exchange Commission (SEC) does not require Regulation D offerings to be registered. Specifically, SEC Rule 501 discusses and defines the terms involving Reg D exemptions, which include the term accredited investor. So how do we define a Regulation D accredited investor as well as other key terms?
Rule 501 Regulation D Accredited Investors
In order to comply with Rules 505 and 506 of Regulation D regarding the selling of securities, these securities may only be sold to accredited investors per the requirements of Rule 501.
Who Qualifies an Accredited Investor?
Under Rule 501, a number of different entities and persons are recognized as accredited investors:
- Persons earning $200,000 per year minimum, or $300,000 minimum with a spouse for each of the past two years and a reasonable expectation of the same income level in the current year.Insurance companies, banks, small business investment companies, business development companies, and registered investment companies.
- Individuals or married couples having a net worth greater than $1 million, excluding the value of their primary residence. afedra.
- Executive officers, directors, and general partners of the business issuing securities
- Trusts, businesses, or employee benefit plans retaining more than $5 million worth of assets.
- An entity in which all the equity owners are accredited investors.
Other Key Terms
Additional terms used in Regulation D accredited investor offerings under Rule 501 include:
Number of Purchasers
The number of purchasers limited by Regulation D exemptions includes every trust, partnership, and business wants, plus every individual investor, with certain exceptions.
Aggregate Offering Price
Under Reg D this can include property, services, cash, cancellation of debt, notes, and any other consideration exchangeable for shares.
Executive Officer
Under Reg D such an individual can include:
- President
- Board member
- Manager of a LLC
Purchaser Representative
According to Rule 501, an individual must meet the following criteria in order to qualify as a purchaser representative:
- Not be an officer, director, affiliate, or other employee of the issuer or beneficial owner who controls at least 10 percent of any class of company issued securities
- Have revealed any material relationship they or their affiliates have with the issuer of the securities or the issuer’s affiliates
- Possess sufficient knowledge and experience in financial matters that enables them to assess the benefits and risks of a potential investment
- Have received recognition of such in writing by the purchaser
Business Combination
Under a Regulation D accredited investor exemption, when a share-based acquisition or merger is not registered with the SEC, it is referred to as a business combination. After the acquisition, the issuer must be under the total control of another company in order to qualify.
With any typical securities offering subject to Regulation D, these are the main terms that will apply.
