Series 7 Exam Question 196: Answer and Explanation

Question: 196

Which of the following is true of accredited investors?

• A. They have had an annual income in excess of $200,000 for at least the last three years.
• B. They have had an annual income in excess of $100,000 for at least the last two years.
• C. They have a net worth of at least $1,000,000, excluding any equity they have in their primary residence.
• D. They have a net worth in excess of $200,000.

Correct Answer: C

Explanation:

C. Certain purchases, such as a Regulation D private placement, may require investors to be accredited (although they have a 35 unaccredited investor exclusion). Accredited investors are ones with a net worth of at least $1 million excluding any equity they may have in their primary residence, or ones with an annual income of at least $200,000 (or $300,000 for joint accounts) for the last two (not three) years that's expected to stay at least the same for the current year.