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, take Investor statements regarding information, and waiver of claims."
New Mexico Accredited Investor Qualification and Verification Requirements for Reg D, Rule 506© Offerings: In New Mexico, accredited investor qualification and verification requirements for Rule 506(c) offerings under Regulation D are crucial to ensure compliance with the Securities and Exchange Commission (SEC) guidelines. Accredited investors have the opportunity to participate in private investment opportunities and have a higher threshold of financial sophistication and suitability. The main purpose of the accreditation process is to protect investors by limiting access to certain types of securities offerings that might be too risky for individuals who do not meet the necessary financial criteria. These requirements aim to safeguard investors while simultaneously promoting access to capital markets for issuers. New Mexico, like other states, adheres to the SEC's accredited investor definition while implementing additional state-specific regulations. New Mexico recognizes the various types of accredited investors defined by the SEC, including: 1. Income-Based Accreditation: Investors whose individual or joint income meets or exceeds $200,000 in the two most recent years (or $300,000 joint income with a spouse) and has a reasonable expectation of reaching the same income level in the current year. 2. Net Worth-Based Accreditation: Investors with an individual or joint net worth exceeding $1 million, either alone or with their spouse. However, primary residences are not included in the net worth calculation. 3. Entity-Based Accreditation: Certain entities, such as banks, insurance companies, registered investment companies, employee benefit plans, and charitable organizations with assets exceeding $5 million, may qualify as accredited investors. To verify accreditation status, issuers are responsible for conducting appropriate due diligence and collecting relevant documentation from potential investors. The SEC allows issuers to rely on specified methods for verifying accredited investor status as long as they are reasonable and diligent in their efforts. Some common methods for verification include: a. Income Verification: Reviewing tax returns, W-2s, or other financial statements to confirm an investor's income threshold. b. Net Worth Verification: Collecting bank statements, brokerage statements, or real estate valuation documents to support an investor's net worth. c. Written Representations: Requesting investors to submit written representations, confirming their accredited investor status through self-certifications, and ensuring their understanding and acceptance of potential investment risks. d. Third-Party Verifications: Employing third-party services, such as registered broker-dealers, lawyers, or accountants, to independently verify an investor's accreditation status. e. Prior Verification: If an investor has previously participated in a Rule 506(b) offering and provided adequate verification, they may not need to repeat the verification process for subsequent Rule 506(c) offerings. New Mexico's accredited investor qualification and verification requirements for Rule 506(c) offerings help protect investors and maintain the integrity of private investment markets. It is important for both issuers and investors to understand and fulfill these requirements to ensure compliance with state and federal regulations and to mitigate potential risks associated with private securities offerings.
