International Accredited Investors and Governing SEC Compliance and Disclosure Interpretations (C&DIs)

International investors always offer an important contribution to providing capital to private placement offers. With the popularity of Regulation D, the current market for private placement offers is extensive. Trillions of dollars have been raised under Regulation D since September 2013 when Title II went into effect. Rule 506(c) of Title II allows for general solicitation, opening up possibilities for issuers to advertise their offering. However, under this exemption, all investors must be verified as accredited and this also includes the requirement for international accredited investor verification.

Foreign investors who wish to participate in 506(c) private placements must adhere to the guidelines issued by the Securities and Exchange Commission (SEC). Crowdfunding platforms are also required to carry out reasonable steps to establish that investors are accredited.

The way in which the investor verification process is to be performed is explained through various Compliance and Disclosure Interpretations (C&DIs) published by the SEC. Several of these interpretations apply to the international accredited investor, as we will review here.

Important Rule 506(c) Info

Rule 506(c), which permits general solicitation and advertising of securities, may be marketed to anyone, as long as all the purchasers are accredited investors. Reasonable steps must be carried out by the issuer to verify the accredited status of such individuals according to the guidance provided by Securities law and the SEC.

SEC C&DIs

Per 255.48

If the purchaser’s income is not reported in U.S. currency, the issuers of securities may use the average exchange rate over the entire calendar year for which income verification is being conducted, or the exchange rate that was in force on the last day of that calendar year.

Per 260.36

If the penalties for reporting false information in a foreign jurisdiction are similar to penalties the IRS imposes, international tax forms reporting income may be used.

Per 260.38

If you rely on a consumer report from a consumer reporting agency that is international, i.e. non-US, then:

• The functions carried out by an international consumer reporting agency must be similar to those performed by a domestic (U.S) consumer reporting agency, and:

• As required, additional steps should be carried out to identify the purchaser’s liabilities.

Per 260.09

Part of a non-exclusive array of verification methods may include the submission of written confirmations by a foreign certified public accountant or licensed or registered attorney in good standing.

An efficient process relative to international accredited investor verification can be obtained through adherence to the above-mentioned C&DIs.

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