I'm not an expert, but if a few of those engineers pooled their money together into an investment club, wouldn't that club be able to meet the accredited investor requirement?
I don't believe the club would have to meet the requirement. I think if you do your investing via an LLC or Corporation you could subvert that rule but I'm not really sure.
Actually, 501 already requires that the indivual investors of the 'club' also be accredited, and the club cannot be formed for the purposes of 'an' investment. However, a group of engineers could form an entity and each become active managers, and their club is able to accept funds from the engineers via a 4(2) exemption under the '33 Act. Then, so long as they didn't run afoul of the '40 Act, they could invest so long as they had $5m in assets. And the neat thing about intellectual property is that the engineers could purchase their stake in the club via a combination of cash and IP, easily and lawfully exceeding the $5m threshold.
That assumes its a trust, what if you just created an s-corp with a few other people and used that as an investment vehicle?
Plus, is there any consequence to saying "yes I am an accredited investor" even if you aren't? I would assume you lose all the "protections" and ability to say "I was duped" but otherwise does anyone care?
In a nutshell, the problem is that you can't really release the company you're investing in from potential liability from you not being accredited. If you decide after you invest that they ripped you off, you may be able to sue both the company and some of individuals involved, or they may be criminally liable for the manner in which they sold securities.
However, there are some situations in state and federal law where being a "sophisticated investor" with knowledge of the markets and the industry allows you to invest.
P.S. I am not a lawyer and this is only my understanding of the situation.
