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The SEC defines people who make over $200,000, or have a net worth over $1 million, as accredited investors. Accredited investors do not have investment limits if they participate in a Reg D or Reg A+ offering. For Reg A+ offerings (Tier II), unaccredited investors may invest up to 10% of the greater of their net worth or their annual income per offering.
Anyone can invest in a Title III crowdfunding securities offering. Because of the risks involved with this type of investing, however, you are limited in how much you can invest during any 12-month period. The limitation on how much you can invest depends on your net worth and annual income.
If either your annual income or your net worth is less than $100,000, then during any 12-month period, you can invest up to the greater of either $2,000 or 5% of the lesser of your annual income or net worth.
If both your annual income and your net worth are equal to or more than $100,000, then during any 12-month period, you can invest up to 10% of annual income or net worth, whichever is lesser, but not to exceed $100,000.
The following table provides a few examples:
||greater of $2,000 of $30,000($1,500)
||greater of $2,000 of $80,000($4,000)
||10% of $100,000 ($10,000)
||10% of $200,000 ($20,000)
||10% of $1.2 million ($120,000), subject to cap
Source: SEC Investor Bulletin: Crowdfunding (Updated: February 16, 2016)
Why is there a difference between Reg A+, Reg CF and Reg D investors?
The SEC has only recently allowed crowd investors to get access to private investments thanks to Reg A+ and Reg CF of the 2012 JOBS Act, which also allowed companies to solicit accredited investors publicly through changes to Reg D.
Before the Jumpstart Our Business companies (JOBS) Act of 2012, private companies who wanted to raise capital had to solicit investments via private channels. The JOBS Act quickly allowed privately held companies to solicit investments on public platforms like the internet.
But only accredited investors had access to those investments until the SEC formalized rules for a portions of the law called Title III (Reg CF) and Title IV (Reg A+). Title III & TItle IV allow people of any income to invest in companies.
Why are there investor limits?
Because Reg A+ and Reg CF allow early stage investing by non-accredited investors, the SEC put limits in place to protect the general public from investing more than they can afford to lose in early stage companies, due to the high risk and long horizon of the investment type.