Yes, the U.S. Securities and Exchange Commission (SEC) has specific requirements for private placement offerings, including that investors must be accredited.

EB-5 Regional Center investments are private placements, which is a way for companies to raise capital by selling securities to a limited number of investors, typically without registering the securities with the SEC.

• What is an Accredited Investor?

An accredited investor is a person that can participate in investments involving unregistered securities, such as private placements, structured products, private equity or hedge funds, etc.

Typically, EB-5 investors may be accredited if they satisfy either the requirements of net worth or earned income.

• Do you meet one or more of the following requirements?

Net Worth Test

A person may be considered an accredited investor if he or she has a net worth exceeding $1 million, either individually or jointly with a spouse. For the purposes of EB-5, net worth does not include your primary residence.

Income Test

A person must demonstrate an annual income of USD $200,000, or $300,000 for joint income, for the last two years with the expectation of earning the same or higher income. An individual must have earned income above the thresholds either alone or with a spouse over the last three years. Note: The income test cannot be satisfied by showing one year of an individual’s income and the next two years of joint income with a spouse. The exception to this rule is when a person is married within the period of conducting the test.

• For the Accredited Investor Status, What is Net Worth? How is it Calculated?

Net worth is the sum of all of your assets worldwide. This could take the form of investment property, stocks, bonds, cash or cash equivalents, etc. Generally, loans are not accepted for net worth, but you can use a loan secured by your personal assets, such as a home equity line of credit. For the purposes of the accredited investor requirement, your primary residence is not included in the calculation of your net worth.

• Accredited Investor Example Scenarios

Example 1

The investor earns more than $200,000 USD per year and has earned this income for the last two years and expects to continue earning this much, but does not have a net worth of $1,000,000 USD.

In this case, the investor is considered to be an accredited investor.

Although the investor does not meet the net worth test of having more than $1,000,000 USD, the investor meets the net income test by earning more than $200,000 per year.

Example 2

The investor earns less than $200,000 USD per year but has a net worth of more than $1,000,000 USD. The investor has assets such as property in other countries, stocks, and bonds, cash, as well as gifted funds from family members.

In this case, the investor is considered to be an accredited investor.

Although the investor does not meet the net income requirement of earning at least $200,000 in income each year for the last two years, the investor does meet the net worth requirement of $1,000,000 USD in total assets, excluding their personal residence.

Example 3

The investor earns less than $200,000 USD per year and does not have a net worth of $1,000,000 USD.

In this case, the investor is NOT considered to be an accredited investor.

The investor does not meet either the net income requirement or the net worth requirement. In this case, the investor can take out a loan secured by personal assets, such as a home equity line of credit (HELOC), or they can be gifted funds by family members in order to reach the $1,000,000 USD net worth requirement.