1: Age requirement
Investors must be 18 years of age or older.
2: Who are Accredited Investors?
Please refer to the Rule 501 of Regulation D of SEC to understand the full definition of an Accredited Investor.
Broadly speaking, an accredited investor is:
- A person who can show an annual income of $200,000, or $300,000 of joint income, for the last two years with expectation of earning the same or higher income.
- The person has a total net worth more than $1 million (excluding your primary residence), either individually or jointly with their spouse.
3: Who are Non-Accredited Investors?
Anyone who does not meet the requirements of an accredited investor as provided in the Regulation D of SEC is a Non-Accredited investor.
4: Investment limit
If either of your annual income or net worth is less than $107,000, the investment threshold during any period of 12-month would be greater of either $2200 or 5% of the annual income or net worth, whichever is less.
If both your annual income and net worth are equal to or above $107,000, the investment threshold during any period of 12-month would be 10% of the annual income or net worth, whichever is lesser or up to a maximum of $107,000.
Table below illustrates the Investment limit with examples:
|Annual Income||Net Worth||Calculation||12-month Limit|
|$30,000||$105,000||greater of $2,200 or 5% of $30,000 ($1,500)||$2,200|
|$150,000||$80,000||greater of $2,200 or 5% of $80,000 ($4,000)||$4,000|
|$150,000||$107,000||10% of $107,000 ($10,700)||$10,700|
|$200,000||$900,000||10% of $200,000 ($20,000)||$20,000|
|$1.2 million||$2 million||10% of $1.2 million ($120,000), subject to $107,000 cap||$107,000|
Investment Limit Calculator
5: How to calculate Annual Income and Net Worth?
To calculate your net worth, investors should deduct the total of their liabilities from the total of their assets. The remaining sum will stand to be the net worth of that individual.
Please note, while calculating the net worth for the purposes of crowdfunding, the value of the investor’s primary residence is not included as an asset. Likewise, any mortgage or loan on that residence will not add to the liability, but only up to the fair market value of the property. Any amount of loan that is above the fair market value of that property will be added under liability for the calculation of the net worth.
Investors can calculate their annual income or net worth jointly with their spouse’s income or assets. However, combined investment limits will still be the same as that of a single investor with the total of the combined annual income or net worth level.
The table below provides a few examples of calculating net worth of an individual for finding out the permissible investment limit of that individual for the purpose of Crowdfunding
|Jane Doe||John Smith||James Lee|
(Not included except for related liabilites below):
|Home equity line:|
|More than 60 days old||—||$20,000||—|
|Less than 60 days old||—||$10,000||—|
|Total included assets||$190,000||$190,000||$190,000|
|Student and car loans||$100,000||$100,000||$100,000|
|Portion of mortgage underwater||—||—||$30,000|
|Home equity line
(Less than 60 days old)
|Total included liabilities||$120,000||$130,000||$150,000|
6: Is it mandatory to invest through a regulated online intermediary (Crowdfunding Portal or Broker-Dealer)?
Investment in a Regulation Crowdfunding offering can only be done through a regulated funding portal or broker-dealer website or mobile app.
The broker-dealer or funding portal, that is the crowdfunding intermediary, must be registered with the SEC and be a member of the Financial Industry Regulatory Authority (FINRA). You can obtain information about a broker by visiting FINRA’s BrokerCheck or calling FINRA’s toll-free BrokerCheck hotline at (800) 289-9999. You can obtain information about an active crowdfunding offerings by visiting the SEC’s website.
It is mandatory for investors to register with the crowdfunding intermediary before completing an investment. Generally, Regulation Crowdfunding prohibit funding portals from:
- Offering investment advice or making recommendations;
- Soliciting purchases, sales or offers to buy securities offered or displayed on its platform;
- Compensating promoters and others for solicitations or based on the sale of securities; and
- Holding, possessing, or handling investor funds or securities.