The Conduct of Business Sourcebook (COBS) in the United Kingdom establishes several classifications of certified investors, allowing them to access certain types of investments that are restricted from the general public. These classifications are based on the investor's knowledge, financial experience, and capacity to take on significant risks.

1. Certified High Net Worth Investor (COBS 4.12B.38R)

Definition:

A certified high net worth investor is a person who meets specific financial requirements, allowing them to participate in high-risk investments.

Requirements:

• Annual Income: The individual must have earned at least £100,000 in the last financial year.
• Net Worth: They must have net assets of at least £250,000, excluding the primary residence, pension rights, and insurance contracts that meet certain criteria.

Declaration:

• The investor must sign a declaration under the terms of Annex 2R of COBS, valid for 12 months, confirming that they meet the above criteria.

Access:

• This certification allows them to access financial promotions and investments that are not available to the general public due to their high-risk nature.

Risks:

• The investor accepts the possibility of losing the entire capital invested and acknowledges that they may not benefit from the standard regulatory protections offered to retail investors.
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2. Certified Sophisticated Investor (COBS 4.12B.39R)

Definition:

A certified sophisticated investor is someone evaluated by an authorized firm and deemed experienced enough to understand and take on the risks of non-traditional investments.

Requirements:

• Evaluation Certificate: The investor must obtain a certificate from an authorized firm confirming that they are capable of understanding the risks of non-traditional investments. This certificate must have been issued in the last 36 months.
• Personal Declaration: In addition, they must sign a declaration under the terms of Annex 3R of COBS, valid for 12 months, confirming their understanding of the associated risks.

Access:

• This certification allows the investor to participate in high-risk financial promotions and investment opportunities that are not available to the general public.

Risks:

• The investor accepts the possibility of losing their entire investment and acknowledges that the promotional materials may not have been approved by authorized persons.

3. Self-Certified Sophisticated Investor (COBS 4.12B.40R)

Definition:

A self-certified sophisticated investor is someone who personally declares they meet certain criteria of experience or knowledge related to high-risk investments.

Requirements:

The investor must meet at least one of the following criteria in the past two years:

• A) Have worked in venture capital or financing for small and medium-sized enterprises.
• B) Have been a director of a company with an annual turnover of at least £1 million.
• C) Have made two or more investments in companies that are not listed on the stock exchange.
• D) Have been a member of a network or syndicate of informal investors for more than six months.

Declaration:

• The investor must sign a declaration under the terms of Annex 4R of COBS, within the last 12 months, confirming they meet one of the above criteria and accept the risks of investment.

Access:

• This certification allows the investor to participate in financial promotions and investments that would otherwise not be available to the general public.

Risks:

• The investor acknowledges that the investments they engage in carry significant risk, and the promotional materials received may not be subject to the same controls as those intended for retail investors.

General Comparison: