July 14, 2018

Our Regulatory Framework

Right now, our offerings are only open to Accredited Investors as the SEC defines them. DigitalMosaic operates under Regulation D, Rule 506(c) in the 2013 changes to the JOBS Act whereby
private offerings can be generally solicited, but only allows accredited investors to access the projects.

One of our main objectives is to open up and provide greater access of alternative asset classes to investors. With the JOBS Act, the SEC established crowdfunding as a viable mechanism to achieve greater access, however, there are regulatory requirements that DigitalMosaic must work within. Due to these legal requirements, we can only allow accredited investors on the platform.

Under federal law Regulation D in the Securities Act of 1933 and the 2012 Jumpstart Our Businesses Act (JOBS Act), if a company wishes to be exempt from registering the sale of securities, they may do so if they meet one of three exemptions, in our case Ruling 506(c). With this exemption, companies must sell unregistered securities only to accredited investors, who are considered by the SEC to be more “sophisticated” and thereby have “sufficient knowledge and experience in business matters to evaluate the merits and risks of the prospective investment”. This rule also applies to entities, such as banks, partnerships, corporation, nonprofits and trusts.

The SEC defines ways in which an individual qualifies as an “Accredited Investor”, and thus become eligible to purchase unregistered securities. According to the Securities and Exchange Commission (SEC), there are two ways to define accredited investors, either by income or net-worth:

  • One who has earned income that exceeded $200,000 (or $300,000 together with a spouse) in each of the prior two years, and reasonably expects the same for the current year, OR
  • One who has a net worth over $1 million, either alone or together with a spouse (excluding the value of the person's primary residence).

In the first option, the individual must have complied with this requirement for three consecutive years and have reasonable belief that this income will be maintained for the
following year.

For an entity to be considered an accredited investor, it must hold assets that total over $5 million or all of the equity owners must be accredited investors.

Please reference the “How Do I Calculate My Net Worth?” section on the SEC’s website for assistance on how to calculate your net-worth.

These regulatory standards go back to to the founding of America’s banking system and are continuing to be redefined as our economy grows and changes, as it did in the 2012 JOBS Act that established crowdfunding as a viable mechanism for investing. We will keep you posted if changes in regulations affect the ways in which Investors can qualify on the DigitalMosaic platform.