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Monday, September 20, 2010

Accredited investor

Wealthy investor who meets certain SEC requirements for net worth or income.

Accredited investors are permitted to invest in certain types of higher risk investments, limited partnerships, hedge funds, and angel investor networks. The term generally includes wealthy individuals and organizations such as a corporation, endowment, or retirement plans. The federal securities laws defines the term accredited investor in Rule 501 of Regulation D as:

1) A bank, insurance company, registered investment company, business development company, or small business investment company; or
2) 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; or
3) A charitable organization, corporation, or partnership with assets exceeding $5 million; or
4) A director, executive officer, or general partner of the company selling the securities; or
5) A business in which all the equity owners are accredited investors; or
6) 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; or
7) 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
8) A trust with assets in excess of $5 million, not formed to acquire the securities offered, whose purchases a sophisticated person makes.

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