To become an accredited investor the (SEC) requires certain wealth, income or knowledge requirements. The investor must fall into one of three categories. Firms selling unregistered securities must put investors through their own screening process to determine if investors can be considered an accredited investor.
The Verifying Individual or Entity should take reasonable steps to verify and determined that an Investor is an "accredited investor" as such term is defined in Rule 501 of the Securities Act, and hereby provides written confirmation. This letter serves to help the Entity determine status, take Investor statements regarding information, and waiver of claims."
Michigan Accredited Investor Qualification and Verification Requirements for Reg D, Rule 506© Offerings In Michigan, Accredited Investor Qualification and Verification Requirements for Reg D, Rule 506© Offerings are in place to ensure compliance with securities laws and to protect both investors and issuers. When it comes to offering securities under Rule 506(c), issuers must adhere to specific guidelines and criteria to verify investor accreditation. The state of Michigan has not established separate accreditation standards or requirements for Rule 506(c) offerings. Instead, it aligns with the federal requirements set forth by the Securities and Exchange Commission (SEC). The SEC provides a clear definition of who can be considered an accredited investor, and these qualifications apply nationwide. Michigan companies seeking to conduct Rule 506(c) offerings must ensure that potential investors meet the accredited investor criteria before accepting their investment. The key categories used to determine accreditation include: 1. Income: An individual must have an annual income of at least $200,000 (or $300,000 jointly with a spouse) for the past two years, with a reasonable expectation of reaching the same income level in the present year. 2. Net Worth: An individual must have a net worth exceeding $1 million, either alone or jointly with a spouse, excluding the value of their primary residence. Net worth calculation typically includes assets like cash, investments, real estate, and other tangible and intangible assets. 3. Entity Accreditation: Certain entities, such as banks, insurance companies, registered investment companies, and employee benefit plans, can qualify as accredited investors based on their status and expertise. Verification of an investor's accredited status is crucial for Rule 506(c) offerings. Issuers generally rely on various methods to confirm investor qualifications, which may include: 1. Income Verification: Asking potential investors to provide documents like tax returns, W-2 forms, or third-party reports to verify their income. 2. Net Worth Verification: Requiring potential investors to provide financial statements prepared by a licensed CPA, IRS tax assessments, bank statements, or third-party appraisals to validate their net worth. 3. Written Confirmations: Investors can also provide written representations stating their qualification as an accredited investor based on the income or net worth thresholds. It's important for issuers to maintain proper documentation and records of the verification process undertaken to demonstrate compliance with the accredited investor qualification requirements. These records also act as evidence in case of any future regulatory inquiries or SEC audits. In summary, Michigan aligns with the federal regulations set by the SEC for the Accredited Investor Qualification and Verification Requirements for Reg D, Rule 506© Offerings. Issuers in Michigan must diligently verify investor accreditation using income, net worth, or entity qualifications and maintain appropriate documentation throughout the process.
