Staff Guidance, Accredited Investors, and Exchange Rates
Question: If a purchaser's annual income is not reported in U.S. dollars, what exchange rate should an issuer use to determine whether the purchaser's income meets the income test for qualifying as an accredited investor?
Answer: The issuer may use either the exchange rate that is in effect on the last day of the year for which income is being determined or the average exchange rate for that year.
The approach provides some opportunity for manipulation. The IRS publishes yearly averages. Treasury provides year end exchange rates. In general, the yearly averages are lower. As a result, in marginal cases, use of the yearly average will qualify more individuals than the year end rate, although this is not always the case (China 2013 rate: Year end: 6.0540; yearly average: 6.446).
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