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Difficulty: EasyMarket Participants and Investor Classifications

Under Securities and Exchange Commission (SEC) regulations, an individual investor seeking to qualify as an accredited investor based on net worth must satisfy which of the following requirements?

  1. Maintain a net worth exceeding $1,000,000, excluding the positive equity in their primary residenceAnswer
  2. B
    Own and invest at least $100,000,000 in securities of issuers not affiliated with the investor
  3. C
    Act as a principal executing securities trades directly from inventory with a mark-up
  4. D
    Hold direct regulatory enforcement authority delegated by a self-regulatory organization

Answer

Maintain a net worth exceeding $1,000,000, excluding the positive equity in their primary residence
Under SEC Regulation D, an individual qualifies as an accredited investor if they have an individual net worth (or joint net worth with a spouse) exceeding 1,000,000atthetimeofpurchase,excludingthenetvalueoftheirprimaryresidence.Alternatively,earningindividualincomeexceeding1,000,000 at the time of purchase, excluding the net value of their primary residence. Alternatively, earning individual income exceeding 200,000 (or $300,000 joint) in each of the two most recent years with a reasonable expectation of the same in the current year also qualifies.

Step-by-Step Solution

1
Identify the target investor classification in the prompt
The prompt asks for individual accredited investor qualification based on net worth.
Accredited investor rules under SEC Regulation D specify precise financial thresholds for individuals.
2
Evaluate SEC Regulation D criteria for accredited status
An individual must have an individual or joint net worth exceeding $1,000,000 at the time of purchase, excluding primary residence value.
The Dodd-Frank Act modified the net worth calculation to exclude equity in an individual's primary residence.

Key Concept

Accredited Investor Thresholds
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Topics

Market Participants and Investor Classifications

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