Question from a European focused dude here. So, am I right in reading that an operator (i.e. VC) owned entity is deemed an accreditor investor if investing as an LP into a US fund?
Yes, an operator-led entity, such as a private fund or fund-of-funds, is deemed an accredited investor when investing as an LP into a US fund. However, it's important to note that certain specific conditions and regulatory exemptions need to be met, like those mentioned under §203(m), which concerns private fund advisers. Also, the fund actually has to act like a pooled investment vehicle, meaning it must have third party investors who are all accredited investors.
So... we actually do syndicates into VC funds where the underlying investors self certify according to the rules of their (European) country. We (the leads of the syndicates) are actually accredited investors/operators, but it seems like based on what you are describing it may be an issue for investing into US funds 😢
This is definitely something you should definitely speak to your lawyer about!
That said, as a general guideline, this can be done but only in compliance with securities laws (for example):
• Rule 500(g): Securities offered and sold outside the U.S. in accordance with Regulation S (which covers rules 230.901 through 230.905) don't need to be registered under the Securities Act and are not included in the calculation of the number of non-accredited purchasers under Regulation D or in the amount of offering sold. https://roamresearch.com/#/app/Funds/page/06-15-2023
• Regulation D's limitation of 35 non-accredited investors, provided that the syndicate itself may have trouble qualifying as an accredited investor unless the total amount raised is over $5 million).
Question from a European focused dude here. So, am I right in reading that an operator (i.e. VC) owned entity is deemed an accreditor investor if investing as an LP into a US fund?
Yes, an operator-led entity, such as a private fund or fund-of-funds, is deemed an accredited investor when investing as an LP into a US fund. However, it's important to note that certain specific conditions and regulatory exemptions need to be met, like those mentioned under §203(m), which concerns private fund advisers. Also, the fund actually has to act like a pooled investment vehicle, meaning it must have third party investors who are all accredited investors.
So... we actually do syndicates into VC funds where the underlying investors self certify according to the rules of their (European) country. We (the leads of the syndicates) are actually accredited investors/operators, but it seems like based on what you are describing it may be an issue for investing into US funds 😢
This is definitely something you should definitely speak to your lawyer about!
That said, as a general guideline, this can be done but only in compliance with securities laws (for example):
• Rule 500(g): Securities offered and sold outside the U.S. in accordance with Regulation S (which covers rules 230.901 through 230.905) don't need to be registered under the Securities Act and are not included in the calculation of the number of non-accredited purchasers under Regulation D or in the amount of offering sold. https://roamresearch.com/#/app/Funds/page/06-15-2023
• Regulation D's limitation of 35 non-accredited investors, provided that the syndicate itself may have trouble qualifying as an accredited investor unless the total amount raised is over $5 million).
Super insightful! Thanks. Huge fan and supporter here btw. Love the content.