What Kind of Investor Am I?


Investing is a personal and individual activity. How you invest is unique to you, your level of risk tolerance and your financial circumstances. Answering some of the questions below will help you make investment decision that meet your life criteria.

What type of investor am I?

An accredited investor is “an individual with a net worth of at least $1 million, not including the value of his or her primary residence; an individual with income exceeding $200,000 in each of the two most recent calendar years or joint income with a spouse exceeding $300,000 for those years and a reasonable expectation of the same income level in the current year”.

Examples include:

  • a bank, insurance company, registered investment company, business development company, or small business investment company;
  • an employee benefit plan (within the meaning of the Employee Retirement Income Security Act) if a bank, insurance company, or registered investment adviser makes the investment decisions, or if the plan has total assets in excess of $5 million;
  • a tax exempt charitable organization, corporation or partnership with assets in excess of $5 million;
  • a director, executive officer, or general partner of the company selling the securities;
  • an enterprise in which all the equity owners are accredited investors;
  • anindividual with a net worth of at least $1 million, not including the value of his or her primary residence;
  • an individual with income exceeding $200,000 in each of the two most recent calendar years or joint income with a spouse exceeding $300,000 for those years and a reasonable expectation of the same income level in the current year; or
  • a trust with assets of at least $5 million, not formed only to acquire the securities offered, and whose purchases are directed by a person who meets the legal standard of having sufficient knowledge and experience in financial and business matters to be capable of evaluating the merits and risks of the prospective investment.

Purchasers receive “restricted securities” in a Rule 506 offering. Therefore, they may not freely trade the securities after the offering, as explained below under the heading “Resales of restricted securities.”

For more information, go to http://www.sec.gov/info/smallbus/qasbsec.htm#4a5

“Qualified Purchasers” are generally defined as investors having a net worth of at least $250,000 (exclusive of home, home furnishings and automobiles), gross income in excess of $100,000 during the immediately preceding tax year, and a reasonable expectation of income in excess of $100,000 during the current tax year”.

California Corporations Code 25102(n) definition of a qualified purchaser has lower income and asset thresholds than comparable the federal definition of “accredited investor.”

“Qualified Purchasers” are generally defined as investors having a net worth of at least $250,000 (exclusive of home, home furnishings and automobiles), gross income in excess of $100,000 during the immediately preceding tax year, and a reasonable expectation of income in excess of $100,000 during the current tax year. There are additional categories of “qualified purchasers” that includes certain institutions and corporations, purchasers acquiring more than $150,000 of the issuer’s securities, high net worth individuals and various other categories.

For more information, view this pdf.

A sophisticated investor is “an investor who does not meet the accredited investor qualification, yet has sufficient knowledge and experience in financial and business matter that makes them capable of evaluating the merits and risks of prospective investments”.

Rule 506 of Regulation D is considered a “safe harbor” for the private offering exemption of Section 4(a)(2) of the Securities Act. Companies relying on the Rule 506 exemption can raise an unlimited amount of money. There are actually two distinct exemptions that fall under Rule 506.

Under Rule 506(b), a company can be assured it is within the Section 4(a)(2) exemption by satisfying the following standards:

  • 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 purchases. Unlike Rule 505, all 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;

For more information, go to http://www.sec.gov/answers/rule506.htm

A non-accredited investor is an investor who does not meet the net worth requirements for an accredited investor under the Securities & Exchange Commission’s Regulation D. A non-accredited individual investor is one who has a net worth of less than $1 million (including spouse) and who earned less than $200,000 annually ($300,000 with spouse) in the last two years.

What is important to me?

  • I want to help create jobs
  • I want to have a social impact
  • My investing is emotionally driven
  • I want to help build a green economy
  • It is important that I invest locally
  • I want collateral to secure my investment

What are my financial considerations?

  • Short-term and long-term liquidity needs
  • Level of risk I am comfortable with
  • Investing experience
  • Length of holding period

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