The probable investor represents that he or she
is acquiring the securities for investment purposes only, and the aim is not to
sell the securities or distribution. These potential investors also represent
that they will be able to bear the economic risk of losing the entire amount of
their investment in the securities and this loss will not affect the standard
of living of the investor.
The investor has overall commitment to the
investments that are not freely marketable and which are in proportion to their
net worth. The overall investment in the securities will not cause any overall
commitment to become unwarranted.
The probable investor has sufficient means of
satisfying current needs and personal exigencies and does not depend on
liquidity in the investment, in securities. The potential investor should have
sufficient experience in making investment decisions of these kinds or they could
seek assistance of their professional representative in making the investment
decision.
Investor Suitability Standards
The offer is made by the company for investment
in the units only to those potential investors who satisfy certain investor
suitability standards in respect to their financial health to bear the loss of
their investment and their investment sophistication.
Rule 504 of regulation D defines that the company
can offer the securities only for investment purpose to investors who satisfy
certain suitability standards designed either by the company or, in certain
circumstances, by the laws of investor’s domicile.
Rule 1001 permits an additional exemption in
[State of Domicile] according to Section 25102 (n)(2)(E). Therefore, except the
requirements of a particular state, the suitability standards established by
the Company for non-[State of Domicile] residents will be those of an
“Accredited Investors” according to Rule 501.
Suitability of investor also defines that the
purpose of investment of the investor is compatible with the objectives of an
investment in the securities.
The suitability standards mentioned showcase the
minimum requirements for prospective investors and fulfillment of the standards
does not necessarily mean that securities are good enough for investment by a
prospective investor.
The company, which is issuing the security, can
at its will reject the subscription of any potential investor if the company
believes, in its sole discretion, that it does not meet the standards for
investment in the securities. Along with this it is the sole right of the company
to waive the subscription standard in any case it feels necessary.
In the Subscription Agreement provided in combination
with the requirement, potential investors must represent that they satisfy the
suitability standards.
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