The SEC has established criteria for preventing people who perhaps should know better from investing in unregistered securities and other things that are less well known than stocks and bonds. For example, if you’ve ever been interested in buying into a privately held company, you have probably heard all about this.
In a nutshell, for an individual to be considered a qualified investor (also termed an accredited investor), that person must either have a net worth of about a million bucks, or have an annual income in excess of 200k. Companies who wish to raise capital from individuals without issuing registered securities are forced to limit their search to people who fall on the happy side of these thresholds.
To read the language straight from the securities lawyers, follow this link: http://www.law.uc.edu/CCL/33ActRls/rule215.html
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Contributed-By: Chris Lott