Accredited Investor Verification Requirement

Accredited Investor Status Required for EB-5 Investments Through EB-5 Regional Center Program

The U.S. Securities and Exchange Commission (SEC) has specific requirements for private placement investment offerings, including that investors participating in these investment offerings must be accredited investors. EB-5 Regional Center investments are private placements, which is a way for companies to raise capital by selling securities to a limited number of investors, typically without registering the securities with the SEC.

What Does it Mean to be an Accredited Investor?

An accredited investor is a person that can participate in investments involving unregistered securities, such as private placements, structured products, and private equity or hedge funds, etc. Typically, EB-5 investors may be accredited if they satisfy either the requirements of net worth or earned income.

Do You Meet One or More of the Following Requirements?

 

Net Worth Test

 

A person may be considered an accredited investor if he or she has a net worth exceeding $1 million, either individually or jointly with a spouse. For the purposes of the Accredited Investor Status, net worth does not include your primary residence.

Net worth is the sum of all of your assets worldwide, minus or loan or debt obligations. This could take the form of investment property, stocks and bonds, cash or cash equivalents, gifts from friends or family etc.

Income Test

 

A person must demonstrate an annual pre-tax income of at least $200,000 (or equivalent amount of non-USD currency) per year for each of the last two calendar years (the joint income threshold for combining with a spouse’s income to meet the requirement is $300,000 per year for each of the last two calendar years), with the expectation of earning the same or higher income in the future. You can include income earned from sources other than wages in the calculation, including income generated by rental properties or short-term stock sales.

Note: The income test cannot be satisfied by showing one year of an individual’s income and one year of joint income with a spouse. The exception to this rule is when a person is married within the period of conducting the Net Income test.

Example 1

The investor earns more than $200,000 USD per year and has earned this income for the last two years and expects to continue earning this much, but does not have a net worth of $1,000,000 USD. In the case the investor is considered to be an accredited investor. Although the investor does not meet the net worth test of having more than $1,000,000 USD, the investor meets the net income test by earning more than $200,000 per year.

Example 2

The investor earns less than $200,000 USD per year, but has a net worth of more than $1,000,000 USD. The investor has assets such as property in other countries, stocks and bonds, cash, as well as gifted funds from family members. In the case the investor is considered to be an accredited investor. Although the investor does not meet the net income requirement of earning at least $200,000 in income each year for the last two years, the investor does meet the net worth requirement of $1,000,000 USD in total assets, excluding their personal residence.

Example 3

The investor earns less than $200,000 USD per year and does not have a net worth of $1,000,000 USD. In the case the investor is NOT considered to be an accredited investor.

Do You Believe You Meet the Accredited Investor Status or Likely Will in the Near Future?

 

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