not very sophisticated !, page-29

A good article on "Sophisticated Investrs" from the Marcus Today website:

SOPHISTICATED INVESTORS

Sophisticated investors (see definition below) are people who have a level of wealth and or expertise in the market that excuses the seller of a financial product from the regulatory duty of care. Sophisticated investors are deemed to be smart enough or big enough to look after themselves. Someone with savoir-faire.

Well, in many cases, that?s a laughing matter. It is also a trap. Just because you have convinced a broker that you are a sophisticated investor doesn?t mean you are sophisticated. It simply means you are part of a class of investor that can be sold stuff without liability and without the usual disclosures that would be required in a prospectus. It says you do not need regulatory protection. It puts you on a list of people that sellers can ?distribute? placements to, private placements, pre-IPO placements. Placements that don?t get offered generally. Placements that don?t even have to be offered to shareholders.

Sometimes this is a privilege. And sometimes a liability. If your relationship with the offeror is not top notch, that is to say ?trusting friends? then I?m afraid you are ?fodder?. And you know what that means. It?s the Golden Rule of the stockmarket. ?If its any good you won?t get offered it. If you get offered it, you don?t want it?. As usual in sales and making money, its all down to the relationship. Being a sophisticated investor is not a relationship, it?s a right to roger, with impunity. So be sophisticated about it.

Bottom line. If you ask questions, demand details, hold people to account, turn most things down and trust no-one you?re a sophisticated investor. If you take every carrot you are offered. You?re a bunny.

If you meet any of the requirements below you can consider yourself a Sophisticated Investor although to participate in offers to sophisticated investors you will need to prove that to the offeror (usually a stockbroker).

Stockbrokers and some financial planners retain lists of registered sophisticated investors to whom they make placements. If you wish to be offered these private placements you need to get on the lists. Ask your broker if they have a sophisticated investor program. You can be on the list for a number of brokers or planners, not just one. THe more the better.

It simply means they can offer you placements with impunity (and often without paperwork). They earn commissions on the placements (often large commissions) so having a list of people to sell to is something they encourage. Sophisticated Investor placements often come quickly with little time for decision. You have to be aware of that. Sometimes there is a not lot of disclosure (sometimes there is). As I say above.....having a good relationship with the broker is paramount - you have to have someone filtering out the crap because you often don't have the information to make an informed decision when they do. A good gauge is to ask what commission the broker is earning on the placement. The higher it is the more risky it is. Any commissions around 2% are probably run of the mill. Above that and the company obviously thought it was going to be a hard sell and the alarm bells start to ding. Some placement fees have been above 12%.

The catch all is that you might as well be on the list. Then you get offered things other people don't get. You don't have to take them.

http://www.marcustoday.com.au/webpages/342_sophisticated-investors.php