There appears to be a minor misstatement of securities law in Tom Stein’s cover story, “Angels or Devils?” (April 2004). Tom states, “According to the Securities and Exchange Commission’s standards, only people with a net worth of at least $1 million or annual income of at least $200,000 can participate in private equity rounds.”

He is incorrect. Tom accurately describes the standards for an “accredited investor,” but he apparently believes that only accredited investors can invest in private equity rounds. The truth is that up to 35 non-accredited investors can invest in them, no matter which of the three routes under Regulation D one chooses. One, called Rule 504, has no limit on the number of investors; the other two, called 505 and 506, permit up to 35 non-accredited investors and an unlimited number of accredited investors.

While many private equity offerings voluntarily limit the investors to only accredited investors (to simplify the type of Private Placement Memorandum they must provide) not all offerings do so. And it certainly is incorrect to state, as Mr. Stein does, that the SEC standards so require.


Samuel M. Shafner

Burns & Levinson LLP

Boston, Mass.