How do I know if an "Investor" Actually has the cash?
The short answer is, You Don’t.
You can of course ask for bank statements or other proof but that can come across as a bit rude, especially if you’ve only just recently met.
Fortunately, there are other ways to find out.
Investors that are members of a syndicate will have been pre-qualified by the managers or gatekeepers of that syndicate and there are legal definitions of who can and cannot hold themselves out as formal investors.
If however, if you are marketing an investment proposal to anyone other than friends and family, then you owe a duty of care to that potential investor. If you don’t take some precautions yourself, you could end up in court because the investment opportunity you are offering could be seen as a collective investment scheme (or close substitute) and such as an unregulated investment it would come under the jurisdiction of the FSA.
The Financial Conduct Authority or FCA places restrictions on the marketing of unregulated investments under article PS13/3 and you can read their full report here: http://www.fca.org.uk/static/documents/policy-statements/ps13-03.pdf
To ensure that you are protected, you would need the potential investor to self-certify that they are a high net worth individual or a sophisticated investor.
If you want others to invest in your project, you don’t have to be a sophisticated investor yourself, but they certainly do.
If you are offering a share of the profits on your project, PS 13/3 says you can only do so after you have verified that your intended partner is a sophisticated investor that meets any one of 6 criteria;
1 Salary of £100k pa +
2 £250k + in investment assets (not including the family home)
3 Professional investor i.e. stockbroker/fund manager
4 Bona fide registered Angel investor
5 Director of £1m + Ltd Co
6 Family member
7 Long time personal friend
The burden of proof is on you to establish that they are one of the above i.e. if they are £100k + earner take a pay slip as proof etc. The proof they give you is part of the due diligence you keep to record you are inviting a sophisticated investors to invest in your project.
At Angels Den we pre-qualify and vet all of our potential investors and ask the awkward questions so that you don’t have to.
That way, when we arrange for you to meet with Angel investors you are safe in the knowledge that they are bona fide, they have the money, they are not tyre-kickers or time wasters and by turning up they are definitely interested in making investments into business or property.
All you have to do is convince them that you are the person to invest in.
This and many more subjects will be expanded on in the Raising Angel Finance Course in Peterborough. For more information contact; karlenepartridge@progressiveproperty.co.uk
Ray is a shareholder and Regional Manager for www.AngelsDen.com and Property Angels Den where investors are introduced to entrepreneurs or developers seeking finance.
If you have a proposal click here: Application form page: http://www.RaisingAngelFinance.co.uk/investment-application-form.html
If you are interested in becoming an Angel Investor, Click here: http://www.becomeanangel.com
No comments:
Post a Comment