For more than 80 years, investors have been limited by provisions of the securities act of 1933, which enforced strict regulations on the advertisement and sale of securities to the public.
Title II of the Jumpstart our Business Startups or “JOBS” Act, passed in September of 2013, provided the catalyst for the emergence of online marketplaces dedicated to direct real estate investing. Two and a half years later and with the growth of online platforms, online real estate investing is now a reality.
Under the Securities Exchange Commission Rule 506(c), issuers can offer securities through means of general solicitation, provided that: all purchasers in the offering are accredited investors; the issuer takes reasonable steps to verify their accredited investor status; and certain other conditions in Regulation D are satisfied.
“General solicitation” includes advertisements published in newspapers and magazines, public websites, communications broadcasted over television and radio, and seminars where attendees have been invited by general solicitation or general advertising. In addition, the use of an unrestricted, and therefore publicly available, website constitutes general solicitation.
An “accredited investor” is a person who earned income that exceeded $200,000 (or $300,000 together with a spouse) in each of the prior two years and reasonably expects the same for the current year; or has a net worth over $1 million, either alone or together with a spouse (excluding the value of the person’s primary residence).
An “accredited investor” may also be an entity such as a bank, partnership, corporation, nonprofit, or trust, when the entity satisfies certain criteria.