Investment Company and Variable Contracts Products Representative (Series 6)Practice Exam

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What is the minimum net worth required for accredited investors?

$500,000
$1,000,000
$1,500,000
$2,000,000

The correct answer is: $1,000,000

The minimum net worth required for accredited investors is set at $1,000,000, excluding the value of their primary residence. This definition originates from the Securities and Exchange Commission (SEC) regulations, which aim to ensure that investors engaging in certain types of high-risk investments meet specific financial criteria, providing a level of assurance that they possess sufficient financial sophistication and resources to understand and bear the risks involved. Accredited investor status enables individuals to participate in private placements of securities and hedge funds, among other investment opportunities, which are not available to the general public. By specifying this threshold, the SEC helps to create a more controlled environment for private investments, intending to protect both the investors and the integrity of financial markets.