The SEC (Securities and Exchange Commission) allows syndicators to “skip” registering their securities if they offer them to accredited investors. Agree with their logic or not, the SEC believes that Accredited Investors are capable of accepting economic risks associated with investing in unregistered securities. However, there are specific requirements for those wishing to qualify as an accredited investor.
Who are Accredited Investors?
Without getting into too many legal terms, according to Regulation D of the Securities Act of 1933 you are an Accredited Investors if you: 1) Made at least $200,000 of annual income in the previous two years, or $300,000 for a married couple; or 2) Have a net worth in excess of $1,000,000, excluding the value of your primary residence.
So, I am an Accredited investor, so what?
Rule 506c allows syndicators to market their deals – but only to Accredited Investors. As an Accredited Investor, you have access to marketed passive investments, which non-Accredited Investors don’t have access to. You will need to prove your eligibility as an Accredited Investor, but you gain an advantage many don’t have.