The last factor the SEC's rule proposal ending the ban on general solicitation in Regulation D offerings suggests that issuers consider in verifying someone's status as an accredited investor is the nature of the offering.
What they mean by this is how you go about soliciting investors. For example, the proposal states, if you look for investors in a public website or huge email blast or Facebook post, you will have to do more to verify that someone is accredited. However, they go on, if a "reliable third party," such as a broker-dealer, sets up a "database of pre-screened accredited investors" you can be much more able to rely on that information.
The other important note in this section: if you are just posting it on Facebook or a website, the SEC does not think it is enough if, as is pretty common today, you just have them check a box in a questionnaire or sign a form saying they are accredited.
Another way to increase your comfort that someone is accredited, says the proposal: if there is a high minimum investment amount. They say, essentially, if the minimum investment is, for example, $1 million, there is a pretty high likelihood that the person has a net worth in excess of $1 million. and/or $200,000 income. They even go as far as to say you probably wouldn't have to check anything else if there is a high minimum, other than confirming that the investment is not being financed by a third party.
Interesting stuff. We'll keep an eye on developments here.
For additional insights on reverse mergers, SPACs, other alternatives to traditional initial public offerings, the small and microcap markets and the economy, visit the Reverse Merger and SPAC Blog by David N. Feldman, Esq., Partner of Richardson & Patel LLP.
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