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IPO Glossary of Terms: Part 3




Description

This article is from the Investing Articles: Public Offerings: IPO and DPO series.

IPO Glossary of Terms: Part 3

Accredited Investor

"Accredited Investor" shall mean any person who come within any of the following categories, or who the issuer or Broker/Dealer reasonably believes comes within any of the following categories, at the time of the sale of the securities to that person:

1. Any bank as defined in section 3(a)(2) of the Act, or any savings and loan association or other institution as defined in section 3(a)(5)(A) of the Act whether acting in its individual or fiduciary capacity; any broker or dealer registered pursuant to section 15 of the Securities Investment Act of 1934; any insurance company as defined in section 2(13)of the Act; any investment company registered under the Investment CompanyAct of 1940 or a business development company as defined in section 1(a)(48)of that Act; Small Business Administration under section 301(c) or (d) of the Small Business Investment Act of 1958; any plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions for the benefit of its employees,if such plan has total assets in excess of $5,000,000; employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974 if the investment decision is made by a plan fiduciary, as defined in section 3(21) of such Act, which is either a bank, savings and loan association, insurance company, or registered investment advisor, or ifthe employee benefit plan has a total assets of $5,000,000 or, if a self-directed plan, with investment decisions made solely by persons that are accredited investors.

2. Any private business development company as defined in section 202(a)(22) of the Investment Advisors Act of 1940;

3. Any organization described in Section 501 (c)(3) of the Internal Revenue Code, corporation, Massachusetts or similar business trust, or partnership, not formed for the specific purpose of acquiring the securities offered, with total assets in excess of $5,000,000;

4. Any director, executive officer, or general partner of ageneral partner of that issuer;

5. Any natural person whose individual net worth, or joint networth with that person's spouse, at the time of his purchase exceeds $1,000,000;

6. Any natural person who had an individual income in excess of $200,000in each of the two most recent years or joint income with that person's spouse in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year;

7. Any trust, with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the securities offered, whose purchase is directed by a sophisticated person as described in 230.506(b)(2)(ii); and

8. Any entity in which all of the equity owners are accreditedinvestors.

For purposes of applying the foregoing suitability standards,the term "Net Worth" shall mean the net fair market value of a person's assets, reduced by (1) the net fair market value of his liabilities, and (2) a reasonable provision for taxes on unrecognized gains.

Subscription Warrant

A type of security, that entitles the holder to buy a proportionate amount of common stock at a specified price, usually higher than the market price at the time of issue, for a period of years or perpetuity; better known simply as a warrant. Warrants are freely transferable and are traded on the major exchanges.

 

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