Accredited Investor

Securities sold under a Regulation D private placement are...

1. A.Guaranteed against loss by the issuerNo such guarantee exists; these are high-risk investments.
2. B.Exempt from SEC registrationCorrect — Reg D is a registration exemption.
3. C.Insured by the FDICPrivate placements are risky, uninsured securities.
4. D.Registered with the SEC like a public offeringThe whole point of Reg D is to avoid full registration.

Why: Reg D provides an exemption from SEC registration, so private placements are unregistered securities sold mainly to accredited investors.

An agent sells an unregistered security to an accredited investor in a proper private placement. This is:

1. A.Always prohibitedThis treats registration as the only lawful path. The Act also permits sales made in exempt transactions, and a properly conducted private placement is one of them, which is why an unregistered security may lawfully be sold this way.
2. B.FraudNothing in these facts involves a misstatement or a concealment. The offering is unregistered because it does not have to be registered, and that status is a feature of the exemption rather than something hidden from the buyer.
3. C.A public offeringA private placement is defined by not being public. It is offered to a limited group without general solicitation, and that restraint is precisely what earns the exemption, so calling it a public offering describes the thing it must avoid being.
4. D.An exempt transaction, and permittedCorrect - private placements are exempt.

Why: A private placement is an exempt transaction, so the sale is permitted.

An accredited investor is one who:

1. A.Has never investedAccreditation turns on financial capacity, not on trading history. A seasoned trader of modest means does not qualify, while a wealthy first-time investor can.
2. B.Is under age 18Being a minor goes to legal capacity to contract, which is a separate question entirely. The accredited investor definition rests on financial thresholds and certain professional credentials.
3. C.Meets income/net-worth thresholdsCorrect - qualifies for private offerings.
4. D.Holds any brokerage accountOpening a brokerage account takes almost nothing and reveals nothing about an investor's resources. If that were the test, private placements would be open to essentially everyone.

Why: An accredited investor meets income or net-worth thresholds and may participate in private placements.

A sponsor conducts a Regulation D offering using general solicitation, so that every purchaser must be an accredited investor. Who carries the obligation to verify accredited status, and what does that obligation demand?

1. A.The issuer must take reasonable steps to verify, and a subscriber's own tick-box representation will not do.Correct. The duty follows the exemption, and the standard demands evidence beyond assertion.
2. B.The selling broker-dealer carries it, because the issuer has no direct relationship with the subscriber.Wrong. A firm may gather evidence, but the condition attaches to the party claiming the exemption.
3. C.No verification is needed where the subscriber signs an investor questionnaire under penalty of perjury.Wrong. A sworn representation is still a representation, which is the thing the standard reaches beyond.
4. D.FINRA performs it through a central register of investor status maintained for private offerings.Wrong. No such register exists and no regulator certifies individual investors.

Why: Where an offering is conducted with general solicitation, the exemption is available only if all purchasers are accredited and the issuer has taken reasonable steps to verify that they are. Because the exemption belongs to the issuer, the verification duty is the issuer's as well, even when it engages a broker-dealer to gather the evidence. Reasonable steps mean something beyond accepting the subscriber's word, which is why a self-certifying questionnaire standing alone cannot carry the offering. In an offering conducted without general solicitation, a reasonable belief formed on the subscriber's representations can be enough.