Risky investments: Who’s allowed in?

State regulators require that firms selling securities — such as Estate Financial —screen investors as a way to protect people from putting too much of their money in higher-risk or more complex investments, said Mark Leyes, a spokesman for the Department of Corporations in Sacramento.

According to those regulations — which are outlined in Estate Financial’s offering circulars — its investors must have a certain amount of net worth, excluding their homes, furnishings and automobiles, to invest with the company.

Under rules ef fective through 2007—which apply to the Estate Financial investors— they were not supposed to put more than 10 percent of their net worth in any single investment each year. That limit was loosened to 25 percent starting this year.

Standards for those who put their money into Estate Financial’s mortgage pool fund—as set by the Department of Corporations and explained in the company’s offering circulars—are lower than for those who invested in fractional shares in individual real estate trust deeds.

Investors in the pooled fund should have had a net worth of at least $75,000, excluding their homes, furnishings and autos, and at least $50,000 in annual gross income, or, barring less income, a net worth of $150,000.

Investors in individual real estate trust deeds must have had a net worth of at least $250,000, excluding homes, furnishings and automobiles, and an annual gross income of at least $65,000. If they can’t meet the required income level, investors need to have a net worth of at least $500,000.

—Melanie Cleveland