What are Private Investors?

by Apr 6, 2017Investment Tips

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Private investors are an integral part of CODE’s network of investors that help support our SME marketplace. We explain what a private investor is.

Private investors, from HNW & sophisticated to retail investors, they are a vital part of our SME marketplace

Private and Retail Investors

There are several types of investors that invest with us at CODE, from institutional investors discussed in our previous post, to retail and private investors which we’ll explain below. Within the classification of private investors is a smaller subset which includes: High Net Worth (HNW) individuals, Sophisticated, Professional and Retail investors.

How are investors classified?

When you register as an investor with CODE we’ll ask you a series of questions to determine what type of investor you are. This means we can send you investment opportunities that fit your investor profile. First off we’ll ask you what sort of investor you are (assuming that you’re not an institutional investor of course) – but how do you know if you’re a sophisticated or retail investor?

Here’s a simple breakdown of the different types of private and retail investors:

  • High Net Worth Investor – The FCA classifies HNW investors as “a person who meets the requirements in COBS 4.12.6 R.” which roughly translates as a person whose annual income exceeds £100,000 and has net assets of £250,000 or more.
  • Sophisticated Investor – This is someone who is familiar with making investments either in a professional capacity, as part of a network or syndicate of investors, has regularly invested in unlisted companies, or is the director of a company with an annual turnover of at least £1m.
  • Professional Investor – A person who is required to be authorised or regulated to operate in the financial markets. This could be for a credit institution, and investment firm, or some other form of institutional investment company or body.
  • Retail Investor – This term covers any individual who buys and sells securities for their own personal account rather than a company or organisation.

Not all investment opportunities are equal

With the rise in publicity and the possibility of higher returns than other securities, both crowdfunding and p2p lending have become increasingly attractive to a wider circle of investors including retail and institutional investors.

But not all investments are suitable for every type of investor. More complex opportunities require a greater degree of knowledge and experience to understand the risks involved. Increased regulation is an important part in protecting investors. Ensuring that you understand the form which the funding instrument will take as well as the way the business operates through self-certifying is one such way we aim to protect you as a CODE Investor.

When you register with CODE we’ll ask you a series of questions to determine what type of investor you are. This ensures you can invest in opportunities that match your investor profile and certification level.

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Risk Warning

Investing in early stage businesses involves risks, including illiquidity, lack of dividends, loss of your investment and dilution and it should be done only as part of a diversified portfolio. CODE Investing Limited is targeted exclusively at investors who are sufficiently sophisticated, or who are judged by CODE Investing Limited otherwise to be appropriate, to understand these risks and make their own investment decisions. You will only be able to invest with CODE Investing Limited once you are registered as sufficiently sophisticated or otherwise appropriate for these types of investment. Investors via CODE investing are not protected from loss by the Financial Services Compensation Scheme against the Company’s default or for any losses they may suffer. Please read the full risk warning for more information. This page has been approved as a financial promotion by CODE Investing Limited, which is authorised and regulated by the Financial Conduct Authority. Investments can only be made on the basis of information provided in the pitches by the companies concerned. CODE Investing Limited takes no responsibility for this information or for any recommendation or opinions provided by the companies.

Tax Wrappers note: Innovative Finance ISA (IFSA), Self Invested Personal Pension (SIPP) and Small Self Administered Scheme (SSAS) : eligibility depends on an individual’s circumstances and is subject to change in the future.