A sophisticated investor certificate allows you to participate in capital raisings that are exempt from the disclosure requirements of the Corporations Act. These capital raisings are for total amounts of less than $10 million, and are generally used by early stage or more speculative companies as it allows them to fund their operations without the expense of a formal prospectus.
Companies that raise capital without a prospectus will only be able to offer placements to investors that have been certified by an accountant as a sophisticated investor.
The criteria that must be met to obtain a sophisticated investor certificate is either gross income of $250,000 p.a. over the last two years, or net assets of $2.5 million or more. The rationale for the tests is that generally people who meet either of these criteria are better placed to make an informed decision about their investment without the protections of a formal disclosure document.