Last Updated on July 20, 2017 by John Fischer
On July 3rd, the Securities act Vol. 11 will be updated their list of common questions related to the Securities Act.
This series will detail the most pertinent of these updates, as many are relevant to Regulation D and accredited investor regulation. If anything is difficult to understand, we have provided simple translations and examples that should help clear up any confusion.
Question 255.49
Question: Can assets in an account or property held jointly with another person who is not the purchaser’s spouse be included in determining whether the purchaser satisfies the net worth test in Rule 501(a)(5)?
Answer: Yes, assets in an account or property held jointly with a person who is not the purchaser’s spouse may be included in the calculation for the net worth test, but only to the extent of his or her percentage ownership of the account or property.
Translation: While Regulation D already takes married couples’ combined net worth into account for accreditation standards, it’s been unclear whether properties held jointly between multiple individuals factor into calculating each individual’s net worth for accreditation. This answer clarifies that jointly held assets do in fact count, but unlike assets held with a spouse, an individual can only factor in whatever percentage of the assets they own. For example, if you held 10% of a $1.5M property, you could only factor $150K (1.5M x .10) into your accreditation calculations.
Advice: While assets held jointly with a spouse can be fully included in net worth calculations, investors claiming joint marital assets must meet higher net worth qualifications ($300K instead of $200K). Individuals factoring in non-marital joint assets are still applying for accreditation as individuals, and as such only have to meet the $200K individual net worth requirement.
If you missed SEC Updates Vol. I be sure to take a look, and keep an eye out for Volume 3 of SEC Updates Series!