Welcome to Investor Qualification and Resales: the unit that answers a question you will face on almost every private deal, which investors are legally allowed to buy in, and where restricted paper can go once it has been sold once.
Exam Weight: 3 scored items within Function 1 (25 items / 50% of exam)
What You'll Learn
In this unit, you'll cover:
- Accredited Investor: Institutional and Entity Categories: which entities qualify by status alone, which generally clear a $5,000,000 asset or investment threshold, and the employee benefit plan that can qualify without clearing one
- Accredited Investor: Natural-Person Tests: the net worth and income tests for individuals, and the professional licenses (including your own Series 82) that qualify a person outright
- Verifying Accredited Investor Status in a General-Solicitation Private Placement: the reasonable-steps verification duty and the non-exclusive methods that satisfy it
- Qualified Institutional Buyer (QIB) Status: the $100,000,000 and $10,000,000 thresholds that define a QIB under the QIB private resale safe harbor
- The QIB Private Resale Safe Harbor: how restricted securities move to QIBs without registering the resale, and why the securities stay restricted afterward
- Qualified Purchaser Status and Its Fund Exclusion: the $5,000,000 and $25,000,000 thresholds that let a private fund skip the 100-investor cap
- Comparing Investor-Status Thresholds: how accredited investor, QIB, and qualified purchaser status differ, and the one place where QIB status carries across to qualified purchaser
Why This Matters
A representative who sells into a Regulation D offering, resells restricted paper to a QIB, or works with a qualified-purchaser fund has to know who is legally allowed on the other side of the trade before the trade happens. Getting an investor's status wrong does not just risk a bad sale; it can blow the issuer's exemption for the entire offering.
The dollar thresholds in this unit look similar at a glance ($1,000,000, $5,000,000, $10,000,000, $25,000,000, $100,000,000) but they attach to different tests, different investor types, and different rules. The exam rewards knowing which number belongs to which test.
Let's start with the entities that qualify as accredited investors.