Compliance, or a lack thereof, is in some cases, the root of systemic risk in financial ecosystems. Government and Intrastate Regulators continue to adjust rules. So of course, business owners follow suit and grey areas arise as a result of poor implementation. Since the birth of the Real Estate Crowdfunding industry, compliance and regulations continue to be negotiated. So for today, what is and isn’t compliant? For California alone, we will delve deeper into these topics as an Accredited Investor as well as an Investment Firm.
- Definition | The Securities and Exchange Commission identifies an Accredited Investor as someone who receives annual income in the previous, current, and expected year of approximately $200K ($300K with joint spouse). Additionally, someone with a net worth of $1MM, not including their residence is considered an accredited investor.
- 10% of Net Worth | An investor is eligible to invest in any amount of offerings as long as it does not exceed 10% of his or her net worth (or joint spouse). This includes all offerings made within the last twelve months as described under the SEC’s 502(c) Regulation D.
- Usury | Investors seeking real estate investments not for personal, family or household purposes can charge no more than 10% interest rate. This law does not apply to those who hold real estate broker licenses.
Like we saw during the amendment of the JOBS Act, all regulators and rules set forth are subject to change. It is necessary for regulations to evolve, in conjunction the economy, in order to achieve sustainability whether it be with a specific industry or the economy as a whole.