"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, take Investor statements regarding information, and waiver of claims."
Rhode Island Accredited Investor Qualification and Verification Requirements for Reg D, Rule 506(c) Offerings
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Hear this out loud PauseAll non-accredited investors, either alone or with a purchaser representative, must be sophisticated?that is, they must have sufficient knowledge and experience in financial and business matters to make them capable of evaluating the merits and risks of the prospective investment.
Hear this out loud PauseFinancial information about the company is also material. The capitalization of the company should be discussed. The offering document should also discuss the company's assets, liabilities and cash flow and whether it has had any earnings.
This means that any information a company provides to investors must be free from false or misleading statements. Similarly, a company should not exclude any information if the omission makes what is provided to investors false or misleading.
Hear this out loud PauseThe Securities Exchange Act requires disclosure of important information by anyone seeking to acquire more than 5 percent of a company's securities by direct purchase or tender offer. Such an offer often is extended in an effort to gain control of the company.
Hear this out loud PauseRule 506(d) states that any Bad Actor who has engaged in a disqualifying event cannot be a part of any offer made under Regulation D. These disqualifying events don't just affect the individual in question. If you make any offering with a Bad Actor as part of your issuing team, the SEC disqualifies the offering.
party verification letter qualifies an investor's accredited status by certifying that a registered broker, investment advisor, licensed attorney, or certified public accountant took steps to confirm the investor's status within the last three months (5).
The company cannot use general solicitation or advertising to market the securities. The company may sell its securities to an unlimited number of "accredited investors" and up to 35 other purchasers.
Requirements of Rule 506 The issuer must provide the non-accredited investors with certain disclosures, such as financial statements and be available to answer questions from non-accredited investors.