Accredited Investor

What are they and how to become one

Table of Contents

What are Accredited Investors?

Why All the Fuss about Accredited Investors?

Becoming an Accredited Investor

What are Accredited Investors?

An accredited investor is defined by the Securities and Exchange Commission (SEC) as "a natural person who has individual net worth, or joint net worth with the person’s spouse, that exceeds $1 million at the time of the purchase or sale, excluding the value of the primary residence of such person." In other words, if you want to be an accredited investor, you need to have some serious dough.

In addition to meeting the net worth requirements, accredited investors must also have an income of $200,000 (or $300,000 jointly with a spouse) for each of the last two years and expect to earn the same amount in the current year. Alternately, they can have a net worth of $1 million or more, excluding their primary residence.

Why All the Fuss about Accredited Investors?

The SEC requires companies that sell securities to accredited investors to provide less information about their business than they would for a public offering. In other words, it's easier for startups to raise money from accredited investors than from the general public.

Becoming an Accredited Investor

If you meet the requirements outlined above, congratulations—you're already an accredited investor! If not, don't despair; there are still ways for you to get accreditation. One option is to take a course offered by a registered broker-dealer or investment adviser. Upon completion of the course, you'll receive a certificate that can be used to demonstrate your accreditation status to issuers of securities.

Professional Requirements and exceptions:

  • Investment professionals in good standing holding the general securities representative license (Series 7), the investment adviser representative license (Series 65), or the private securities offerings representative license (Series 82)
  • Directors, executive officers, or general partners (GP) of the company selling the securities (or of a GP of that company)
  • Any “family client” of a “family office” that qualifies as an accredited investor
  • For investments in a private fund, “knowledgeable employees” of the fund

In Conclusion

There's a lot that goes into becoming an accredited investor—namely, having a whole lot of money. But if you're committed to growing your startup and want to enjoy all the benefits that come with being an accredited investor, there are options available to help you reach your goal. So get out there and start earning those big bucks!

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