Securities regulators require that a comprehensive document (prospectus) be created before investments are sold to the general public.
An “accredited investor” is an investor who qualifies to purchase investments that are not distributed by prospectus. Such investors are presumed to have sufficient knowledge and sophistication to evaluate the merits of investments with a reduced level of disclosure.
According to the BC Securities Commission, an accredited investor includes:
- Corporations, limited partnerships, trusts or estates having net assets of at least $5 million.
- Individuals who have at least $1 million in financial assets (cash and securities) before taxes. (In calculating an individual’s financial assets, any outstanding loans incurred to acquire those assets must be deducted.)
- Individuals whose net income before taxes exceeds $200,000 (or $300,000 combined income with spouse) in each of the two most recent years and who reasonably expects to exceed that net income in the current year.
- Individuals who have at least $5 million in net assets.