25. Under SEC Regulation D, which of the following parties is considered an accredited investor?
Answer: C
A person whose net worth, excluding the net equity in their primary residence, exceeds $1 million at the time of purchase
An accredited investor, as defined under SEC Regulation D, includes individuals whose net worth exceeds $1 million, excluding the value of their primary residence, at the time of purchase.
A) A person whose joint income with their spouse exceeds $200,000
This option describes an individual who may qualify as an accredited investor based on income, but the question specifically asks for the net worth criterion. Therefore, while this is a valid definition for some accredited investors, it does not meet the requirement outlined in the question.
B) A person whose net worth, excluding the net equity in their primary residence, exceeds $500,000 at the time of purchase
Although this option presents a net worth requirement, the threshold of $500,000 is below the established criterion of $1 million for accredited investors under SEC Regulation D. Thus, this option is incorrect.
C) A person whose net worth, excluding the net equity in their primary residence, exceeds $1 million at the time of purchase
This is the correct option as it accurately aligns with the SEC Regulation D definition of an accredited investor. Individuals meeting this criterion have the financial sophistication and capability to bear the risks associated with investing in unregistered securities.
D) A charitable organization, partnership or corporation whose assets exceed $2.5 million
This option reflects another category of accredited investors, specifically for entities rather than individuals. While it is true that such organizations can qualify as accredited investors, the question focuses on individuals, making this option irrelevant in this context.
Conclusion
The correct answer is clearly defined by the net worth requirement of exceeding $1 million, which is a key criterion for individual accredited investors under SEC Regulation D. All other options either misrepresent the criteria or apply to different categories of accredited investors, underscoring the importance of understanding the specific definitions within securities regulations.