Private Investing

We enable our customers to purchase selected non-publicly tradeable securities, such as investments in private funds and small companies that that are not listed on U.S. securities exchanges. This is what we refer to as private investing.

Any Folio customer may visit the Private Investing part of our site when logged into their account. However, not all private offerings will be available to all customers, as many offerings will require the investors to meet the definition of an accredited investor.

Under the Securities Act of 1933, Rule 501(a), an accredited investor is one who has either earned individual income of $200,000–or $300,000 if the investor files jointly–in both of the previous 2 years, with a reasonable expectation that income in the current year also will be at that level, or one who has individual net worth (excluding primary residence)–or joint net worth with a spouse–in excess of $1,000,000. You may also wish to visit the SEC website to learn more, and view the SEC’s bulletin on accredited investors.

For most offerings on our site, we ask whether you are an accredited investor before you’re allowed to view the offering documentation. In addition, for offerings made under Regulation D, Rule 506(c), we are required to verify the status of accredited investors. We’ll let you know after you subscribe to an offering if you need to obtain verification.

For some private security offerings, we’re required by law to verify the status of accredited investors. To obtain that verification, please send documentation as described below to us at verify@folioinstitutional.com.

We generally review verification documents within 5 business days of receiving them, but the review could take longer.

When an offering requires accredited investor status verification, the verification process must be completed before the offering closes. Otherwise, investment requests will be automatically rejected.

3 Ways to Obtain Verification

You may choose any one of the following:

1. Email us a letter that uses this template and is dated within the last 90 days. The letter must be from a CPA, attorney, registered investment advisor, or brokerage firm, and it must attest to the account owner’s status as an accredited investor. There is currently no charge for this method of verification.
2. Send us documents to verify the account owner’s income (such as IRS Form 1040 or W-2) for the most recent two years. There is a $25 fee for this method of verification, which generally will be billed to the account owner after the review is completed.
3. Send us documents to verify the account owner’s net worth (such as bank or brokerage account statements) dated within the past 60 days. This method of verification will require a signed release to permit us to request a credit report from a national credit reporting agency. There is a $75 fee for this method of verification, which generally will be billed to the account owner after the review is completed.

Note that income verification is valid for 12 months from the date we confirm it, while net worth verification is only valid for 3 months from the date we confirm it.

The minimum and maximum investment amount for an offering is set by the issuer and will vary for each offering. The maximum investment amount may also be limited by securities regulations. These limits are shown during the online subscription process.

Typically, we do not charge the purchaser for investments in newly issued private securities–the issuer normally pays such costs. However, we would generally charge commissions for secondary transactions in these securities, and may also charge custody or other fees, which are disclosed as part of the offering documents and other agreements you may have with us.

Coverage provided by Securities Investor Protection Corporation (SIPC) insurance depends on the type of security involved. Debt and equity securities are usually covered by SPIC insurance, but not all private offerings that could be on the Folio platform will be covered.

Broadly speaking, SIPC coverage protects investors from certain losses resulting from investor securities missing from their brokerage accounts. SIPC may cover missing stocks, bonds, Treasury securities, certificates of deposit, mutual funds, money market mutual funds, and certain other investments as “securities.” SIPC does not protect commodity futures contracts (unless held in a special portfolio margining account), or foreign exchange trades, or investment contracts (such as limited partnerships) and fixed annuity contracts that are not registered with the U.S. Securities and Exchange Commission under the Securities Act of 1933. Depending on the nature of the unlisted security being purchased through this offer, this security may not be eligible for SIPC insurance coverage while held in your brokerage account.

As a broker-dealer, we are required to obtain additional information before we can allow customers to purchase private securities.

We offer private securities to enable you to build a well diversified portfolio that meets your needs.

We work with issuers to meet the requirements necessary for their securities to be eligible for purchase and custody in IRA accounts, but not all private securities will be eligible. You can see if a private security is eligible for purchase in an IRA on the subscription page for the offering. The site will not allow you to enter a subscription request for a qualified retirement account if the security is not IRA eligible.

Funds will be moved from your account to the account of the issuer upon the closing of the offering.

To learn more about an offering, you should review the offering materials that are available on Folio’s site.

No. Custody of the private securities must remain at Folio, and the securities are not transferable, except in limited cases such as death and divorce, and when approved by the issuer.

No. Custody of these securities is exclusively at Folio.

We process these actions in the client’s brokerage account, similarly to the way we handle such actions for any public security.

Yes, just as with publicly traded securities.

Folio has reviewed the offering materials and concluded that there is a reasonable basis for some investors to purchase the securities, if they meet an individual purchasers’ specific financial situation and objectives. This is the standard Folio uses to determine whether an offering can be listed on our platform.

In addition, in some cases Folio retains an independent third party, CrowdCheck, to review the factual statements made by security issuers in its offering documents. For each such issuer, CrowdCheck issues a report that provides what it calls a “Verified Check” for the offering. The Verified Check means that CrowdCheck determined that the company is a legitimate venture conducting the type of business it claims and confirmed material assertions made by the company in the offering materials. The Verified Check does not address the likelihood of business success and should not be considered investment advice.

Yes. An institutional investor, such as a hedge fund, family office, investment bank, endowment, or pension fund can open the appropriate type of corporate account at Folio and make investments in any securities available to them on the platform, including private securities.