M. James Faison, attorney at Faison Law Group, discusses securities regulation. Navigating securities regulation is a crucial aspect of early-stage investing. Both federal and state bodies, such as the Securities and Exchange Commission (SEC) and state Offices of the Attorney General, regulate securities.
Registering securities can be complex, costly, and time-consuming, but exemptions exist. One determining factor for these exemptions is whether investors are classified as “accredited.” In early-stage investing, especially during the friends and family rounds, the focus is usually on these types of individual investors.
To meet the financial criteria for accredited investors status, a person must have a net worth of over $1 million, excluding their primary residence, or earn an individual income exceeding $200,000 (or joint income above $300,000) for the past two years, with the expectation of the same income level in the future.
Start-ups are not restricted to investments from accredited investors. Instead, the available exemptions become more limited, which may necessitate additional regulatory filings and adherence to stricter compliance rules. Consult with corporate law attorneys at the Faison Law Group for guidance on navigating securities regulation, identifying exemptions for accredited and non-accredited investors, and maintaining regulatory compliance at the federal and state levels.