Questions about accredited investors?

[Ric King]

What are the legal repercussions if you lie about being a accredited investor? And what kind of trouble can the issuer get into? What kind of forms do you get from the issuer or is it just on good faith?  I am not a accredited investor but I do plan on making this investment that requires me to be so any information on this would be greatly appreciated. 

Thanks

Ric

[Natalie Kolodij]

That's a little troublesome.....and then you go on to try to sell him coaching. 

An accredited investor is someone who meets certain qualifications based on their net worth as an individual. 

The SEC originally initiated these regulations and restrictions in 1933. Per the SEC's definition 

• "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)."

The reason these folks are allowed to partake in investments that you are not, if you are not accredited, is basically the SEC placing greater liabilities on those investors to invest in riskier items because based on their wealth they are assuming those investors to be knowledgeable enough, and comfortable enough financially...that they are fully responsible and can be held to a higher standard in terms of their personal risk. 

To the SEC an accredited investor is basically someone who they're assuming knows enough to be fully responsible for their financial choices, based on the above criteria. 

It gives the company offering the investment a greater protection because if you're accredited you can't later say you...didn't understand ..or...weren't given enough information. If you're accredited you're taking full responsibility. If you sign something falsifying this qualification...you're creating liabilities for both yourself and the company offering. 

Additionally, most investments that require you to be accredited are often higher risk and more non-liquid....meaning without meeting their financial requirements a downtown (that you'd have no recourse against) could have a way larger impact than if you were making $2mil a year.