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Who can be on the whitelist?
All U.S. persons of GAIN purchasers must be an “Accredited Investors”. International (i.e. non-U.S.) persons do not need to be accredited investors and must not be from a black-listed country (Iraq, North Korea, etc.).
What is an Accredited Investor or Qualified Purchaser?
U.S. Federal securities laws define the term Accredited Investor as any of the following:
• 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, excluding the value of the primary residence of such person;
• 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
• a trust with assets in excess of $5 million, not formed to acquire the securities offered, whose purchases a sophisticated person makes; or
• a bank, insurance company, registered investment company, business development company, or small business investment company;
• 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;
• a charitable organization, corporation, or partnership with assets exceeding $5 million;
• a director, executive officer, or general partner of the company selling the securities;
• a business in which all the equity owners are accredited investors.
What are the forms of accredited status verification:
Net Income Verification – Review of an individual’s IRS documents including (W-2, 1099, K-1, 1040) for most recent two years, together with a written certification from the individual that they expect to continue to have enough income to qualify as accredited.
Net Worth – Review of the following documents, which must be dated within the prior 3 months, together with a written representation from such person that all liabilities have been disclosed
- For Assets: bank statements, brokerage statements and other statements of securities holdings, certificates of deposit, tax assessments and appraisal reports issued by independent third parties
- For Liabilities: a credit report
Third Party Verification: Written confirmation from one of the following that they have verified accredited investor status within the last 3 months:
- Registered broker-dealer
- Registered investment advisor
- Licensed attorney or CPA
Pre-Existing Accredited Investors. Pre-existing investor of an issuer that were previously verified as accredited under 506(c)
Note: If relying on joint income or net worth with a spouse, then documents for the spouse must also be provided.