Rule 501: Definitions

Accredited investor (501(a))

The categories of people and entities that can invest without the protections that apply to non-accredited investors. See every category.

Affiliate (501(b))

A person that directly or indirectly controls, is controlled by, or is under common control with another person.

Aggregate offering price (501(c))

The total of everything the issuer receives for the securities: cash, services, property, notes, cancellation of debt and other consideration. Non-cash consideration is valued by reasonable standards, and foreign currency is converted to U.S. dollars. This figure decides whether you are within Rule 504’s $10 million limit.

Business combination (501(d))

Transactions described in Rule 145(a), and exchanges of securities by the issuer for the stock or assets of another company that give the issuer control.

Calculating the number of purchasers (501(e))

This rule matters for Rule 506(b)‘s limit of 35 non-accredited purchasers. You don’t count:

• Accredited investors
• Relatives, spouses and spousal equivalents of a purchaser who share the purchaser’s home
• Trusts and estates in which the purchaser and those relatives hold more than half the beneficial interest
• Entities in which the purchaser and those relatives own more than half the equity

An entity counts as one purchaser unless it was formed to buy the securities, in which case each owner counts. Clients of an investment adviser and customers of a broker-dealer count individually.

Executive officer (501(f))

The president, any vice president in charge of a main business unit or function, and any other officer or person who performs policy-making functions.

Final order (501(g))

A written directive or declaratory statement issued by a federal or state agency after notice and an opportunity for hearing. Final orders can trigger the bad actor rules.

Issuer (501(h))

The meaning in Section 2(a)(4) of the Securities Act, with special rules for companies in bankruptcy proceedings.

Purchaser representative (501(i))

Someone who helps a non-accredited purchaser evaluate the investment. The representative must:

• not be an affiliate, director, officer or other employee of the issuer, or a 10% owner, with limited exceptions for relatives and related trusts and entities;
• have enough knowledge and experience in financial and business matters to evaluate the investment;
• be acknowledged in writing by the purchaser as their representative for this specific investment; and
• disclose in writing any material relationship with the issuer in the past two years, and any compensation received from it.

Spousal equivalent (501(j))

A cohabitant in a relationship generally equivalent to that of a spouse.