- AdministratorOctober 27, 2020 at 7:37 am
Another great question. And just for further clarification, according to the SEC, the 12-month Reg CF limit applies to both accredited and non-accredited investors right now (although this might change if the SEC moves forward with its proposed changes).
If you’re asking how and if it’s enforced today, the answer is that it really isn’t. Each individual funding portal may try to have you enter your investments, net worth, and income, and then tell you how close you are to your limit (and perhaps even prevent you from investing more until you update the numbers), but there is not anyone who is able to enforce this across all the different sites.
Keep in mind, the real reason for the SEC having this limit is to protect the investors. That being said, the way the regulations set the limits today isn’t perfect, which is why the new SEC proposals linked to above propose to remove the accredited investor limit and change how the non-accredited limit is calculated to allow higher investment amounts.
It is part of the regulation, so technically it’s more than a “strong suggestion”, but there is really no feasible way to enforce it.
If you are exceeding your own Reg CF limit, the only person you are potentially hurting is yourself. If there’s a bad outcome and you lose a lot of money and you invested more than you were legally allowed to, that’s your own fault. At worst it could perhaps disqualify you from reparation payments you may be due in the event of a lawsuit with a fraudulent offering due to you breaking the regulations, but even then, is the issuer or portal really going to verify all the past annual incomes and net worths for all investors, and how could they realistically do that?
None of this is legal advice and all investors should follow the regulations. Hopefully this gives some more perspective on the 12-month Reg CF limits.
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