Threshold updates for High Net Worth and Sophisticated Investors

New thresholds for categorising investors as high net worth or sophisticated will come into force on 31 January 2024. Our regulatory specialists break down the key changes and their significance.

The most commonly used exemptions for financial promotions focus on certified high net worth investors (HNWI) and self-certified sophisticated investors. These help small and mid-sized enterprises access private capital without the burden of full compliance.

HNWI income threshold raised to £170,000

The annual income level for classifying as HNWI has increased substantially from £100,000 to £170,000. This better reflects inflation since the thresholds were last updated in 2005.

HNWI asset threshold excluding home, pensions and rights under insurance contracts now £430,000

In addition to income levels, individuals with net assets over a set figure of £430,000 qualify as HNWI. Importantly, an investor’s primary residence and benefits held in a pension scheme and rights under insurance contracts are now excluded. So liquid financial assets over £430,000 meet the test.

No longer sophisticated based purely on past investments

Previously, individuals could self-certify as sophisticated investors if they had made multiple investments of over £50,000 in unlisted shares or uninsured collective schemes over the prior 18 months. However, this route has now been eliminated. Sophistication will need to be evidenced through other means going forward.

Company turnover proxy for directors raised to £1.6 million

Company directors can still classify as sophisticated based on annual turnover, but the figure has increased substantially from £1 million to £1.6 million. This should still assist directors of growing SMEs to access finance while providing investor protection.

Get in touch to discuss impacts and compliance needs

Please contact us to speak to a member of our financial services regulatory team to discuss how the updated rules could impact your firm’s compliance obligations and financing activities.

Mark Chapman
Partner, Commercial
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This reflects the law and market position at the date of publication and is written as a general guide. It does not contain definitive legal advice, which should be sought in relation to a specific matter.

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