Qualified Investor Investments?

[rizzmo]

For an individual to be considered a qualified investor (also termed an accredited investor), that person must either have a net worth of about a million bucks or have an annual income in excess of $200,000.

Reaching the criteria to become a qualified investor has been a goal of mine since I first read about it when I was 20. I'm 27 now and hoping to reach this goal in the next few years. I was wondering if anyone posting here falls into this category of investor and, if so, what type of investement vehicles are made available once you reach this status?

[Fern]

You must be talking about terms pertinent to a specific firm?

At the mutual fund house where i used to work, the term "qualified" referred to investment accounts that enjoyed tax-deferred status, such as an IRA or 401k or 403b plan.

"Non-qualified" referred to taxable accounts.

[rizzmo]

Hi Fern thanks for the post. Upon further review


Regulation D
Rule 505

Rule 505 provides an exemption for offers and sales of securities totaling up to $5 million in any 12-month period. Under this exemption, you may sell to an unlimited number of "accredited investors" and up to 35 other persons who do not need to satisfy the sophistication or wealth standards associated with other exemptions. Purchasers must buy for investment only, and not for resale. The issued securities are "restricted." Consequently, you must inform investors that they may not sell for at least a year without registering the transaction. You may not use general solicitation or advertising to sell the securities.

An "accredited investor" is:

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 charitable organization, corporation or partnership with assets exceeding $5 million; a director, executive officer, or general partner of the company selling the securities; a business in which all the equity owners are accredited investors; a natural person with a net worth of at least $1 million; a natural person with income exceeding $200,000 in each of the two most recent 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 to acquire the securities offered, and whose purchases are directed by a sophisticated person. It is up to you to decide what information you give to accredited investors, so long as it does not violate the antifraud prohibitions. But you must give non-accredited investors disclosure documents that generally are the same as those used in registered offerings. If you provide information to accredited investors, you must make this information available to the non-accredited investors as well. You must also be available to answer questions by prospective purchasers.

Here are some specifics about the financial statement requirements applicable to this type of offering:

Financial statements need to be certified by an independent public accountant; If a company other than a limited partnership cannot obtain audited financial statements without unreasonable effort or expense, only the company's balance sheet, to be dated within 120 days of the start of the offering, must be audited; and Limited partnerships unable to obtain required financial statements without unreasonable effort or expense may furnish audited financial statements prepared under the federal income tax laws.

As it turns out meeting the requirements for being a accredited investor is only applicable if you plan to buy unregistered securities.