Under SEC law, a company that offers its own securities must register these investments with the SEC before it can sell them unless it meets an exception. One of those exceptions is selling unregistered investments to accredited investors.
To become an accredited investor the (SEC) requires certain wealth, income or knowledge requirements. The investor must fall into one of three categories. Firms selling unregistered securities must put investors through their own screening process to determine if investors can be considered an accredited investor.
The Verifying Individual or Entity should take reasonable steps to verify and determined that an Investor is an "accredited investor" as such term is defined in Rule 501 of the Securities Act, and hereby provides written confirmation. This letter serves to help the Entity determine status.
California Certificate of Accredited Investor Status
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US-ENTREP-0011-13
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How to fill out Certificate Of Accredited Investor Status?
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To qualify as accredited, an individual investor must have a net worth (excluding his or her primary residence) of at least $1 million dollars or an annual income of over $200,000 (or over $300,000 in joint income with a spouse) for the two most recently completed years with a reasonable expectation of achieving the ...
To confirm their status as an accredited investor, an investor can submit official documents for net worth and income verification, including: Tax returns. Pay stubs. Financial statements. IRS forms. Credit report. Brokerage statements. Tax assessments.
Accredited Investor Verification In a Rule 506(b) offering, the issuer may take the investor's word that he, she, or it is accredited, unless the issuer has reason to believe the investor is lying. In a Rule 506(c) offering, the issuer must take reasonable steps to verify that every investor is accredited.
Among other categories, the SEC now defines accredited investors to include the following: Individuals who have certain professional certifications, designations, or credentials. Individuals who are ?knowledgeable employees? of a private fund. SEC- and state-registered investment advisers5.
If that type of official documentation is not available, you may be able to provide evidence through earnings statements, pay stubs, a letter from your employer certifying your income, or perhaps bank statements that show that you receive that income.
? Self-certified investors are treated in a ?generally similar manner? to accredited investors. and are able to invest alongside them. ? May also be of interest to listed issuers. ? Further facilitating their capital raising efforts by private placement.
The SEC's Rule 506 allows self-certification of investors in order for them to become accredited.
After all, qualified purchasers must be capable of investing $5 million or more on their own, which means they will likely meet the $1 million net worth requirement to be considered an accredited investor. Granted, the two don't always go hand in hand, but they do align more often than not.