What is an "eligible investor"?

Eligible investor definition

An eligible investor is a type of wholesale investor. Eligible investors are people who enough experience or knowledge about financial products to assess the risks and merits of a transaction. The benefit of being classified as a wholesale investor is that you're likely to see a much greater range of deal flow. This is especially true for offers from growth companies, because they may not want to incur the time and expense of preparing a highly regulated public offer. The potential downside is that some of the regulation which has been designed to protect investors will not apply to you.

Eligible investor is a type of wholesale investor

Wholesale investor is an umbrella term which captures all investors that are allowed access to a greater range of dealflow due to the lighter regulation that applies to their investment activity. The requirements to meet the wholesale investor criteria are described in the Financial Markets Conduct Act 2013. To read our summary of the criteria, and to assess whether you meet them, please read our article on What is a wholesale investor in NZ?

Most of the wholesale investor criteria are objective measures such as net worth, income and particular types of experience in financial services and investing. The eligible investor criteria is the most broad because it covers a wider range of business experience and knowledge.

Eligible investor certificate

An eligible investor is legally defined as a person who has sufficient knowledge and experience dealing in financial products that enables them to sufficiently assess the merits and risks of a transaction. To confirm that you are an eligible investor you need to complete an "Eligible Investor Certificate" which states that you have experience and expertise in investing in early stage companies.

The eligible investor certificate certifies that you have sufficient experience which allows you to assess the merits of an offer, your information needs in relation to the offer, and the adequacy of the information provided by any person involved in the offer.

Overseas terminology

People will often refer colloquially to "eligible investors" and "wholesale investors" as "accredited investors" and "sophisticated investors". In the USA, the term accredited investor is used to classify investors who meet certain net-worth and income requirements. The term accredited investor does not apply in New Zealand. In New Zealand, the most accurate and relevant term to describe investors with special access to financial products is a "wholesale investor".

Many of the offers accessible through Snowball Effect are available to all investors, however some are available only to wholesale investors.