Stockbroker Law - Thursday, April 21, 2016
Follow Up: SEC Issues Report on Definition of Accredited Investor

On December 18, 2015 the Securities Exchange Commission issued a comprehensive report including the clarification of the definition of Accredited investor. The financial markets have seen an explosion of the sale of Regulation D private placement type investments to unsuspecting investors who are oftentimes tricked into being convinced or otherwise representing that they are in fact accredited investors. Unscrupulous brokers engage in this trickery in order to push speculative and illiquid, private placement type investments, oftentimes including the purchase of an interest in an operating business enterprise or operating company.

The Accredited Investor definition includes a natural person whose income exceeds $200,000 in each of the two most recent years or $300,000 in joint income with a person spouse, with an expectation that they will reach the same levels of income in the current year in which the private placement investment is being pitched to the investor. A natural person as an Accredited Investor has also been defined to include someone whose net worth exceeds $1,000,000 (individually or jointly with a spouse) exclusive of the value of their primary residence.

Improperly sold Regulation D/private placement type investment schemes frequently includes the presentation of an accredited investor questionnaire to an unsuspecting or otherwise unqualified investor with the brokers actually checking the qualification boxes or blanks in order to induce the sale of an improper investment to an investor who does not in fact qualify as an accredited investor.

Notably, the accredited investor rules are also designed to protect investors who can ill afford to lose a substantial portion of their net worth as the result of the purchase of an oversized or concentrated investment in an illiquid and speculative operating company or business venture with no track record of success or viability.

We offer a free initial consultation to investors who fell they may have been victimized through the purchase of private placement type investment through false representations of the accredited investor requirement made by their broker. For a free initial consultation contact the Law Offices of Timothy J. O'Connor at (518) 426-7700.


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