Accredited Investor

By: William Carleton, Counselor @ Law, and volunteer chair of ACA Public Policy Advisory Council

Yes, there's Title III under the JOBS Act, promising equity crowdfunding (think Kickstarter or IndieGoGo, just not restricted to awards or products, but instead offering ownership in the company); yes, there's Reg A+, also bequeathed by the JOBS Act; and there are a plethora, now, of state crowdfunding laws that lower the bar to who may invest in private companies.

By: Marianne Hudson, ACA Executive Director

Last week, Scott Shane wrote a column in Entrepreneur.com, Would a Higher Accredited Investor Threshold Clip Angels’ Wings? While the answer to that question to me is obviously “yes”, Scott concluded “data on the angel capital market’s response to the 2010 increase in the (accredited investor) threshold doesn’t support that view.”

I’ve read his column and traded an email or two with him since, and I have to say, Pardon Me?

ACA today provided guidance on the significance of angel group membership in connection with new standards for accredited investor verification. Under Securities and Exchange Commission (SEC) Rule 506(c), which becomes effective September 23, 2013, startups and emerging companies that generally solicit for investors will have heightened duties to verify that all purchasers are accredited.*

Rule 506(c) represents a significant change in securities law, and uncertainty about the verification process is of concern to members of the Angel Capital Association and the active angel community at large. ACA has been vocal in our objections to the rule’s safe harbors that would require sharing wealth or income data, but it is important to recognize that they are not the full rule. The SEC provided a significant and flexible approach for complying with this rule using a principles-based methodology. ACA is providing its guidance on how membership in an Established Angel Group may meet the requirements for a startup that uses general solicitation to verify that all investors are accredited under the principles-based methodology specified in Rule 506(c).

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