If you have explored alternative investments, you will probably have been asked to confirm whether you are a high-net-worth or sophisticated investor. This is an important step, and understanding what it means helps you get access to a wider world of investment opportunities with confidence.
Why Do These Categories Exist?
Under the Financial Services and Markets Act 2000 (FSMA), there are strict rules about how investment opportunities can be promoted in the UK. Many higher-risk opportunities, such as shares in unlisted companies, can only be promoted to investors who are more likely to understand and be able to bear the risks involved. The Financial Promotion Order sets out who those investors are.
The aim is simple: to make sure that complex, higher-risk opportunities reach people who are in a position to evaluate them properly.
What Is a High-Net-Worth Investor?
A certified high-net-worth investor is someone who meets set financial thresholds, based on either their annual income or their net assets. Your main home, pension and certain insurance benefits are excluded when calculating net assets. You confirm this by signing a statement, which is a recognised part of the process.
What Is a Sophisticated Investor?
A self-certified sophisticated investor is someone who has relevant investment experience. This might include having made more than one investment in an unlisted company in the last two years, having worked in private equity or in providing finance to small and medium-sized businesses, being a director of a company of a certain size, or being a member of a business angels network.
How Does Self-Certification Work?
Before you can view details of certain opportunities, you will be asked to read and sign a short statement confirming which category you fall into. The statement also explains that you understand the risks, including that you could lose all of the money you invest. You can find our forms on the self-certification page.
It is important to answer honestly. These categories exist to protect investors, and the thresholds and criteria are set by law and can change, so it is worth checking the latest position each time you invest.
Why New Capital Link Asks You to Self-Certify
New Capital Link takes its responsibilities seriously. Every investor is asked to self-certify before viewing investment information, so that opportunities are only shown to people for whom they may be appropriate. It is one of the ways we make sure our investors can explore alternative investments with clarity and confidence.
Important Information
This article is for general information only and is not financial, tax or legal advice. Alternative and early-stage investments are high risk: you could lose all the money you invest, returns are not guaranteed, and you may not be able to sell your investment quickly. Tax treatment depends on your individual circumstances and may change. Please read our risk warning and consider taking independent financial advice before investing.
