2000 Investor Limit

What Is the 2000 Investor Limit?

The 2,000 Investor Limit is an expectation required by the Securities and Exchange Commission (SEC) that orders a company that surpasses 2,000 individual investors, and with more than $10 million in combined assets, must file its financials with the commission. As per SEC rules, a company that meets these criteria has 120 days to file following its fiscal year's end.

Understanding the 2000 Investor Limit

The 2,000 investor limit or rule is a key threshold for private businesses that don't wish to unveil financial data for public consumption. Congress raised the limit from 500 individual investors in 2016 as part of the Jumpstart Our Business Startups (JOBS) Act and Title LXXXV of the Fixing America's Surface Transportation (FAST) Act. The updated rules likewise determine a limit of 500 people who are not accredited investors before public filing is required.

The prior threshold had been 500 holders of record regardless of accredited investor status. Congress started discussing an increase in the limit in the wake of the 2008 recession and a blast in online businesses (some of which whined that they were developing quick to such an extent that the disclosure rules had turned into a burden at too early a stage of their lifecycle).

The JOBS Act likewise set up a separate registration threshold for banks and bank holding companies, permitting them to end the registration of securities or suspend revealing on the off chance that that class of shares is held by under 1,200 individuals.

Investor Thresholds and Equity Crowdfunding

The JOBS Act amendments to SEC rules worked with the development of crowdfunding platforms. These platforms are able to fund-raise from individual investors online without giving itemized financial data. The rules laid out limits on how much individuals can invest in SEC-approved crowdfunding platforms as a percent of the lesser of their annual income or net worth.

The individual limits for crowdfunding, through an investment entry approved by the SEC, as of May 2017:

• If either your annual income or your net worth is under $107,000, during any year period, you can invest up to the greater of either $2,200 or 5 percent of the lesser of your annual income or net worth.
• In the event that both your annual income and net worth are $107,000 or seriously during any year period, you can invest up to 10 percent of your annual income or net worth, whichever is less, not to surpass $107,000.

These computations do exclude the value of your home.

Model

For instance, assume that your annual income is $150,000 and your net worth is $80,000. Occupations Act crowdfunding rules permit you to invest the greater of $2,200 — or 5% of $80,000 ($4,000) — during a year period. So in this case, you can invest $4,000 more than a year period.

Features

• The 2,000 investor limit or rule is a key threshold for private businesses that don't wish to uncover financial data for public consumption.
• Congress raised the limit from 500 individual investors to 2,000 investors in 2016 as part of the JOBS and FAST Acts.
• The increased investor limit has opened greater possibility for equity crowdfunding.
• A business with in excess of 2,000 distinct shareholders, adding up to $10 at least million in capital, must file with the SEC even on the off chance that it is a privately-held company.