Question

A hedge fund is being sold to investors as a private placement under Regulation D. An agent believes that this fund would be an excellent investment opportunity for several of his clients. The agent may discuss the fund with which of the following clients?

- A newly retired man, whose annual income last year was $200,000
- A middle-aged couple who are both physicians with a joint annual income of $400,000
- A young, aggressive investor with a net worth of $500,000 and an annual income of $150,000
- A couple that just won the lottery, whose annual income this year was $500,000 and whose net worth is $550,000

Answer 1

The hedge fund can be discussed with the couple with a joint annual income of $400,000 and the young investor with a net worth of $500,000 and an annual income of $150,000.

Step-by-step explanation:

Under Regulation D, which governs private placements, the hedge fund can only be discussed with accredited investors.

An accredited investor is an individual or entity that satisfies certain income and/or net worth requirements.

Based on the information provided, the middle-aged couple who are both physicians with a joint annual income of $400,000 and the young, aggressive investor with a net worth of $500,000 and an annual income of $150,000 would be eligible to discuss the fund as potential clients.