Question

An individual who wishes to participate in crowdfunding a company must

Multiple Choice

• have at least 10 years of investment experience and a net worth of $500,000 or more.

• have a net worth of at least $1 million and net income of $200,000 or more in 2 of the last 3 years.

• be an SEC registered investor and have annual income of $250,000 or more.

• have a net worth of at least $500,000, annual net income of $200,000 or more in 2 of the last 3 years, and a minimum of 10 years of investment experience.

• have net income of $250,000 or more in 2 of the last 3 years along with a minimum net worth of $2 million.

Answer 1

Answer: (ii) have a net worth of at least $1 million and net income of $200,000 or more in 2 of the last 3 years.

This qualification pertains to the Securities and Exchange Commission’s definition of an “accredited investor”. According to Rule 501 of Regulation D, to be qualified as an accredited investor, an individual must have:

1. individual net worth, or joint net worth with that person's spouse, in excess of $1,000,000. The individual’s primary residence must not be included in the calculation of net worth.
2. individual income in excess of $200,000 in each of the two most recent years or joint income with that person's spouse in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year.

The SEC allows accredited investors to invest in securities that are not registered with it. The qualifications for accredited investors are to ensure that the investors are aware of the greater risk involved in investing in unregistered securities, which are riskier due to the lack of publicly available information.