http://smallbusiness.yahoo.com/r-article-a-113695-m-1-sc-11-the_rules_entrepreneurs_must_know_before_soliciting_investors-i

Sophisticated and Accredited Investors				Sophisticated and Accredited Investors.txt

SEC - Investor Bulletin: Accredited Investors
http://www.investor.gov/news-alerts/investor-bulletins/investor-bulletin-accredited-investors

1. Accredited Investors
2. Accredited Investors

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Sophisticated Investor another name for 	 Accredited Investor

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1. Accredited Investors

Regulation D of the 1933 Securities Exchange Act defines accredited investors as individuals who have a net worth of $1 million or income of at least $200,000 in the two years prior to investment.  For couples, the prior income requirement is $300,000.  The SEC notes that income requirements are met only if there is a reasonable expectation that income levels will be maintained in the future.


Accredited investors can also include banks, insurance companies, small business investment companies and corporations, charitable organizations or partnerships with assets exceeding $5 million.



An accredited investor, in the context of a natural person, includes anyone who:

* earned income that exceeded $200,000 (or $300,000 together with a spouse) in each of the prior two years, and reasonably expects the same for the current year, OR

*has a net worth over $1 million, either alone or together with a spouse (excluding the value of the person’s primary residence).

On the income test, the person must satisfy the thresholds for the three years consistently either alone or with a spouse, and cannot, for example, satisfy one year based on individual income and the next two years based on joint income with a spouse. The only exception is if a person is married within this period, in which case the person may satisfy the threshold on the basis of joint income for the years during which the person was married and on the basis of individual income for the other years.

In addition, entities such as banks, partnerships, corporations, nonprofits and trusts may be accredited investors. Of the entities that would be considered accredited investors and depending on your circumstances, the following may be relevant to you:

* any trust, with total assets in excess of $5 million, not formed to specifically purchase the subject securities, whose purchase is directed by a sophisticated person,  or
* any entity in which all of the equity owners are accredited investors.

In this context, a sophisticated person  means the person must have, or the company or private fund offering the securities reasonably believes that this person has, sufficient knowledge and experience in financial and business matters to evaluate the merits and risks of the prospective investment.



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2. Accredited Investors
	
Accredited Investors

Under the Securities Act of 1933, a company that offers or sells its securities must register the securities with the SEC or find an exemption from the registration requirements. The Act provides companies with a number of exemptions. For some of the exemptions, such as rules 505 and 506 of Regulation D, a company may sell its securities to what are known as "accredited investors."

The federal securities laws define the term accredited investor in Rule 501 of Regulation D as:

* 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 who has individual net worth, or joint net worth with the person’s spouse, that exceeds $1 million at the time of the purchase, excluding the value of the primary residence of such person;
* 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 in excess of $5 million, not formed to acquire the securities offered, whose purchases a sophisticated person makes.
For more information about the SEC’s registration requirements and common exemptions, read our brochure, Q&A: Small Business & the SEC.

http://www.sec.gov/answers/accred.htm