Accredited investors are also referred to as sophisticated investors or classified investors. All of these terms refer to investors who meet the conditions set out in the First Schedule to the Israeli Securities Law, 5728-1968.
In practice, these investors are not included in the count of the 35 investors who may be approached as part of an offering that does not constitute a public offering.
In the past, this definition was identical to the definition of a qualified client under the Regulation of Investment Advice, Investment Marketing and Investment Portfolio Management Law, 5755-1995. Under that law, a client must meet two of three conditions relating to the value of their liquid assets, their expertise in the capital market and the number of transactions they carried out during the four quarters preceding their classification.
The definition under the Securities Law was amended in 2016. Today, it is primarily based on relatively high asset or income thresholds. Nevertheless, the term “accredited investor” remains commonly used in relation to this definition as well.
The Israeli Securities Law permits an offering that does not constitute a public offering to be made to no more than 35 investors, excluding investors classified as accredited investors. As a result, accredited investors may be offered unique investment opportunities, including investments that are not available to the general public.
Accredited investors may participate in investments that are not open to the general public, provided that they present evidence showing that they hold liquid assets and/or earn income at or above the minimum thresholds prescribed by law.
Below are important questions and answers regarding the definition of an accredited investor.
Definition – Who Is Considered an Accredited Investor?
The previous requirements relating to experience or expertise in the capital market have been removed. Today, an individual is required to meet at least one of the following three criteria:
- Liquid assets with a total value of NIS 9.4 million(1).
- Annual personal income of at least NIS 1.41 million, or annual household income of at least NIS 2.1 million, in each of the previous two years.
- Liquid assets with a total value of at least NIS 5.8 million, together with annual personal income of at least NIS 705,000, or annual household income of at least NIS 1.05 million, in each of the previous two years.
The amounts are adjusted according to the Consumer Price Index once every three years from the date of their publication.
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What Is the Difference Between the Definition of an Accredited Investor in Israel and Under US Law?
Under US law, an individual may generally qualify as an Accredited Investor by meeting one of the following criteria:
- Annual income of at least USD 200,000 in each of the previous two years, or joint annual household income of at least USD 300,000.
- Net worth of at least USD 1 million, excluding the value of the primary residence.
Profimex has chosen to apply this minimum requirement to all of its investors, including those who are not classified as accredited investors under Israeli law, even where the investment manager does not require it.
This policy reflects Profimex’s belief that the threshold is appropriate for helping ensure that investors are not committing funds that they may need for essential purposes. Meeting this requirement is therefore a prerequisite for participating in any investment offered through Profimex.
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Accredited Investors – Frequently Asked Questions
What Are the Benefits of Being Classified as an Accredited Investor?
An investor who is classified as an accredited investor, also referred to as a classified or sophisticated investor, is entitled to receive comprehensive financial information about investments, including historical return data, projected future returns and a comparison between an investment’s original projections and its actual performance. Accredited investors may also participate in investment opportunities that are available exclusively to accredited investors.
How Can You Prove That You Are an Accredited Investor?
Under the rules of the Israel Securities Authority, an investor’s accredited status must be verified when the investor joins an investment in that capacity. Acceptable evidence of such status includes written confirmation from an accountant, attorney or another relevant independent professional with appropriate knowledge of the matter, confirming that the investor meets the applicable definition and explaining how this was verified.
Alternatively, the investor may provide evidence and information demonstrating that they meet one of the eligibility criteria, subject to approval by Profimex’s Compliance Department. Such documentation may include bank account statements, statements from managed investment accounts, Form 106 annual income statements and income tax returns. These documents will be reviewed in accordance with the specific eligibility criterion declared by the investor.
How Are Liquid Assets Defined?
According to the definition of the Israel Securities Authority, liquid assets include cash, deposits, financial assets as defined under the Regulation of Investment Advice, Investment Marketing and Investment Portfolio Management Law, 5755-1995, and securities traded on a stock exchange.
Financial assets include units as defined under the Joint Investment Trust Law, 5754-1994, shares or units of a fund registered outside Israel, options, futures contracts, structured products, index-linked products and advanced study funds, known in Israel as Keren Hishtalmut funds.
What Is Considered Household Income?
Household income is the income of a family unit, consisting of an individual and the family members who live with that individual, or family members who are financially dependent on one another.
Can Anyone View Profimex's Return Data?
No. Under the guidelines of the Israel Securities Authority, historical return data and projected future returns may be presented without limitation only to accredited investors.
What Benefits Do Accredited Investors Receive at Profimex?
Accredited investors are among the first to receive comprehensive financial information about investment opportunities, including projected returns and a complete business plan.
At Profimex, accredited investors are members of the Profimex InnerCircle and are entitled to additional benefits, including:
- A significant discount on the cost of a comprehensive medical screening day focused on cancer detection and prevention at the Integrated Cancer Prevention Center at Tel Aviv Sourasky Medical Center, also known as Ichilov Hospital.
- A series of exclusive events, including Profimex Inner Talks. At each event, one of Profimex’s investors delivers an inspiring lecture relating to their professional field. Investors are also invited to gala evenings, seminars, conferences and special community initiatives.
- Profimex offers accredited investors who are interested in social investments the opportunity to attend a personal consultation meeting and participate in content events with members of the “Committed to Give” initiative, which works to advance social philanthropy in Israel.
