High Net Worth and ‘Sophisticated’ Investors

If you earn at least £100,000 a year or have net assets excluding property and pensions of at least £250,000, you can self-certify yourself as a high net worth individual (HNWI) or a ‘sophisticated investor’.

Since 2005, HNWIs and sophisticated investors can be more easily approached by people offering financial promotions about making investments in unlisted securities.

The rules have been relaxed to help ‘business angels’ and others seeking finance for SMEs and to help those seeking informal venture capital generally. To class as a sophisticated investor you must:

  • have made at least one investment in an unlisted security in the previous two years; or
  • have been a member of a business angels network for at least six months; or
  • have worked in a professional capacity in the provision of finance to SMEs in the last two years or in the provision of private equity; or
  • be or have been within the last two years a director of a company with a turnover of at least £1m.

Promoters need to have a ‘reasonable belief’ that you have self-certified. The self-certification must be in writing, but a promoter can accept verbal assurance that someone has self-certified as a sophisticated investor or HNWI.

Once someone has been accepted, the protections for investors in regard to the promotion of securities by someone authorised under the Financial Services Act are removed. ‘Risk warnings’ must however still be included in all promotional material.

Our expert team can assist with all investment issues. For more information, please call 0800 024 1976 or contact us.