What Is An Accredited Investor?: Part 1

What Is An Accredited Investor?: Part 1

“Accredited investor” is term used in the US federal securities laws specifically in connection with the sale and issuance of private securities pursuant to a regulatory exemption under the Securities Act of 1933.  The regulatory exemption is known as “Regulation D” and is found at 17 C.F.R. § 230.501 through 508.  Very basically, an accredited investor is a wealthy individual or business entity whose wealth indicates to securities regulators and judges that they possess sufficient financial resources to hire attorneys to enforce obligations and analyze investments for legal risks.  The US federal securities laws were enacted in part to prevent fraudulent practices in connection with the sale of securities.  The idea is that people who do not have the resources to enforce their legal obligations and undertake analysis of investments should not invest in private securities because the issuer of the private securities has reduced disclosure obligations relative to a issuer of securities who files a registration statement with the SEC, and becomes subject to continuing reporting obligations under the Securities Exchange Act of 1934, as amended.  These continuing reporting obligations include the filing of 10Ks and 10Qs, which are public annual and quarterly reports of financial results.