If you are looking to raise money or sell investments, it is important to know what a Reg D Accredited Investor is and how to find them. This is a select group of individuals with a high-income earning and a high net worth. You can’t tell who is accredited simply by looking at them. Rather, there are set guidelines that have been created by the SEC as to who can be considered accredited.
Guidelines for Being a Reg D Accredited Investor
The SEC has created these guidelines, and each investor must pass them continuously in order to be accredited. Just because someone was accredited in the past, does not mean they are today.
1) They have made $200,000 or more as an individual over the past two years and are likely to do so again in the current year, or they make $300,000 a year combined with their spouse and are likely to do so again OR
2) They have a net worth of $1 million or more, excluding their primary residence.
The income calculation is fairly simplistic except for individuals that own a business. Many business owners make this amount of money but by deducting things like depreciation and amortization, their tax returns do not indicate this level of income. The net worth qualification is fairly straightforward with one exception. If someone owes more money than their house is worth, the negative equity needs to be deducted from their total net worth. This does not apply to positive equity.
Becoming Certified as a Reg D Accredited Investor
Most investors self-certify, meaning that they sign a document stating how much they make or what their net worth is and sign it. This works perfectly well when companies are raising money using Reg D Rule 504, 505, or 505b. If, however, the company is raising funds using Reg D Rule 506c, a third party must provide the certification after reviewing financial documents. This can be a member of the company, an attorney, licensed broker-dealer, or CPA.
Why Working with a Reg D Accredited Investor is Smart
These investors are more likely to have disposable income to invest. Their income is high and has been so for a period of time, or they have significant assets already, sometimes both. This makes them the ideal prospect for investing in private placements, starting a brokerage account, buying property, etc.
If you are looking to work with accredited investors, you will need help finding them. Unlike traditional sales leads, these leads must be qualified and full of people that meet the SEC standards. They are difficult to locate and can take years of networking in order to build a solid lead base. Fortunately, you can purchase a lead list of accredited investors from both www.salesleads.tv and www.accreditedinvestorleads.com. This enables you to spend the majority of your time pitching deals and walking people through closing, rather than wasting time looking for names and phone numbers.