Qualified oil investors are investors who meet specified criteria for making what can be considered higher-risk investments. The requirements are set forth by the U.S. Securities and Exchange Commission (SEC).
Definition of Qualified Oil Investors
The federal securities laws defines qualified oil investors, using the term accredited investor, in Rule 501 of Regulation D. Qualified oil investors must be:
“a natural person who has individual net worth, or joint net worth with the person’s spouse, that exceeds $1 million at the time of the purchase, excluding the value of the primary residence of such person; a natural person with income exceeding $200,000 in each of the two most recent years or joint income with a spouse exceeding $300,000 for those years and a reasonable expectation of the same income level in the current year; or a trust with assets in excess of $5 million, not formed to acquire the securities offered, whose purchases a sophisticated person makes.”
Other qualified investors can banks, insurance companies, investment companies, employee benefit plans (if the plan has total assets in excess of $5 million); a charitable organization, corporation, or partnership with assets exceeding $5 million; or a business in which all the equity owners are accredited investors.
Not All Qualified Oil Investors Should Invest in Oil
Qualified oil investors must be able to meet minimum income requirements and be accredited, but more than that, qualified oil investors are investors who have the right mindset for oil investing.
If you are:
- Looking to make a quick buck without risk
- Do not have disposable income available
- Do not have the patience to perform due diligence
- Don’t have an interest in the oil industry
You may not want to invest in oil even if you are a qualified oil investor. Qualified oil investors are those who meet the financial criteria set forth by the government, but successful qualified oil investors are those who have the patience to perform due diligence on all oil investments, a desire to diversify their investment portfolio, and a willingness to face some risk in exchange for the potential of enormous payoff.
For qualified oil investors, there are a variety of benefits, from tax deductions to short- and long-term payouts. If you’re ready to learn more about oil well investing, contact us for more information.