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."
Puerto Rico Accredited Investor Qualification and Verification Requirements for Reg D, Rule 506© Offerings In Puerto Rico, as elsewhere, accredited investor qualification and verification requirements play a crucial role in Reg D, Rule 506(c) offerings. These requirements ensure that only eligible investors can participate in such offerings, safeguarding both investors and issuers. Here is a detailed description of the Puerto Rico accredited investor qualification and verification requirements for Rule 506(c) offerings, focusing on the various types of qualifications and verification methods: 1. Individual Accredited Investor Qualification: To qualify as an individual accredited investor under Rule 506(c) in Puerto Rico, an individual must meet at least one of the following criteria: — Possess a net worth exceeding $1 million, either individually or jointly with a spouse (excluding the value of the primary residence). — Present an individual income of at least $200,000 in each of the past two years (or $300,000 jointly with a spouse) with a reasonable expectation of reaching the same income level in the current year. — Hold certain professional certifications, designations, or credentials recognized by the Securities Exchange Commission (SEC) indicating the individual's knowledge and experience in financial or business matters. 2. Entity Accredited Investor Qualification: Entities such as corporations, partnerships, LCS, trusts, and certain retirement plans can also be considered accredited investors under Rule 506(c). To qualify, they must meet at least one of the following criteria: — Possess assets exceeding $5 million, either solely or together with its equity holders. — Be an entity composed entirely of accredited investors. — Be a trust with total assets exceeding $5 million, and its purchases are directed by a sophisticated person, who has such knowledge and experience in financial and business matters, that they are capable of evaluating the investment. 3. Verification Methods for Individual Investors: Reg D, Rule 506(c) requires the issuer to take reasonable steps to verify that each individual investor meets the accredited investor qualification. Acceptable verification methods include: — Reviewing recent tax returns, W-2s, or other similar forms that evidence the individual's income. — Obtaining a written confirmation from a registered broker-dealer, investment advisor, attorney, or certified public accountant stating that they have taken reasonable steps to verify the investor's accredited status. 4. Verification Methods for Entities: For entities, the issuer must reasonably verify that they meet the accredited investor qualification. Acceptable verification methods include: — Reviewing documentation, such as financial statements or tax returns, prepared by independent third-party individuals or entities. — Obtaining a written confirmation from a registered broker-dealer, investment advisor, attorney, or certified public accountant that they have taken reasonable steps to verify the entity's accredited status. 5. Other Considerations: It is important to note that while Rule 506(c) allows for general solicitation and advertising to attract investors, issuers must still take appropriate precautions to ensure that only accredited investors participate. Failing to meet the verification requirements can result in severe consequences for both the issuer and the investor. In conclusion, Puerto Rico adheres to accredited investor qualification and verification requirements for Reg D, Rule 506(c) offerings. These requirements aim to protect investors by ensuring that only eligible individuals and entities can participate in private offerings. By carefully following the outlined qualification and verification methods, issuers can provide a legitimate and secure investment opportunity to accredited investors in Puerto Rico.
