Course III – Eligibility and Investment Limitations

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:

  1. 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.
  2. 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

In any 12-month period an individual investor is permitted to invest up to the following limits:

  • If your annual income or net worth is less than $107,000, you can invest the greater of $2,200, or 5 percent of the greater of your annual income or net worth.
  • If both your annual income and net worth are equal to or more than $107,000, then the limit increases to 10 percent of the greater of your annual income or net worth; and
  • If you are an accredited investor you are not subject to any investing limits in Reg-CF.  An accredited investor is and individual 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 and has a total net worth more than $1 million (excluding your primary residence), either individually or jointly with their spouse.

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 $105,000 ($5,250)
$5,250
$150,000
$80,000
greater of $2,200 or 5% of $150,000 ($7,500)
$7,500
$150,000
$107,000
10% of $150,000 ($15,000)
$15,000
$200,000
$900,000
10% of $900,000 ($90,000)
$90,000
$1.2 million
$2 million
No investment limit
None

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
Primary residence
(Not included except for related liabilites below):
Home value
$300,000
$300,000
$300,000
Mortgage
$200,000
$200,000
$200,000
Home equity line:
More than 60 days old
$20,000
Less than 60 days old
$10,000
Included assets:
Bank accounts
$20,000
$20,000
$20,000
401(k)/IRA accounts
$100,000
$100,000
$100,000
Other investments
$50,000
$50,000
$50,000
Car
$20,000
$20,000
$20,000
Total included assets
$190,000
$190,000
$190,000
Included liabilities:
Student and car loans
$100,000
$100,000
$100,000
Other liabilities
$20,000
$20,000
$20,000
Portion of mortgage underwater
$30,000
Home equity line
(Less than 60 days old)
$10,000
Total included liabilities
$120,000
$130,000
$150,000
Net Worth
$70,000
$60,000
$40,000

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.

 

7: What is an “accredited investor”?

According to the SEC, an “accredited investor” is:

  • a bank, savings and loan association, insurance company, registered investment company, business development company, or small business investment company or rural business investment company
  • an SEC-registered broker-dealer, SEC- or state-registered investment adviser, or exempt reporting adviser
  • a plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, if such plan has total assets in excess of $5 million
  • 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 tax exempt charitable organization, corporation, limited liability corporation, or partnership with assets in excess of $5 million
  • a director, executive officer, or general partner of the company selling the securities, or any director, executive officer, or general partner of a general partner of that company
  • an enterprise in which all the equity owners are accredited investors
  • an individual with a net worth or joint net worth with a spouse or spousal equivalent of at least $1 million, not including the value of his or her primary residence
  • an individual with income exceeding $200,000 in each of the two most recent calendar years or joint income with a spouse or spousal equivalent exceeding $300,000 for those years and a reasonable expectation of the same income level in the current year or
  • a trust with assets exceeding $5 million, not formed only to acquire the securities offered, and whose purchases are directed by a person who meets the legal standard of having sufficient knowledge and experience in financial and business matters to be capable of evaluating the merits and risks of the prospective investment
  • an entity of a type not otherwise qualifying as accredited that own investments in excess of $5 million
  • an individual holding in good standing any of the general securities representative license (Series 7), the investment adviser representative license (Series 65), or the private securities offerings representative license (Series 82)
  • a knowledgeable employee, as defined in rule 3c-5(a)(4) under the Investment Company Act, of the issuer of securities where that issuer is a 3(c)(1) or 3(c)(7) private fund or
  • a family office and its family clients if the family office has assets under management in excess of $5 million and whose prospective investments are directed by a person who has such knowledge and experience in financial and business matters that such family office is capable of evaluating the merits and risks of the prospective investment
 

Pre-Investment Agreement

The next 8 slides will allow us to process your investment. Note that these next steps are a legal requirement – Thank you for your patience and financial support of this investment opportunity. Jordan Gillissie – CEO

Before we execute the investment, it’s important for us to make sure you’re comfortable and knowledgeable in early stage investing. We want to make sure that you:

    • Received and have reviewed the education materials sent to you.
    • UNDERSTAND; that there are restrictions on your ability to cancel your investment commitment and obtain a return of your investment.
    • KNOW; It may be difficult to resell securities acquired under Regulation Crowdfunding.
    • AGREE; investing in securities offered and sold in reliance on section 4(a)(6) of the Securities Act involves risk. Investors should not invest any funds unless he or she can afford to lose the entire amount of his or her investment. Your investment may not work out, and you must be in a financial condition to bear the loss.
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