How to Get Accredited Investor Status – Reviewing the Requirements

The basic definition of an accredited investor is a person or entity the SEC considers wealthy or sophisticated enough to suffer the financial loss that could potentially accompany investing in securities or platforms that are minimally regulated and don’t require the type of disclosure associated with public stock market investments. Let’s look at how one can get accredited investor status.

Categories for Accredited Investor Status

* Registered investment companies, insurance companies, and banks

* Corporations, charities, or partnerships with $5 million or more in total assets

* ERISA employee benefit plans having $5 million or more in total assets

* A business entity where all the equity owners are accredited investors

* A director, executive officer, or general partner of the issuer of the securities being offered or

sold, or a director, executive officer, or general partner of a general partner of that issuer.An individual with more than $200,000 in income over the two previous years, or more than $300,000 with a spouse, with the expectation of earning the same amount or greater in the current year

* An individual having a net worth greater than $1 million,not including the individual’s primary residence and after discounting all their other liabilities (including liabilities exceeding the value of their primary residence and liabilities incurred on their primary residence within the last 60 days))

* A trust with total assets of $5 million or more

Note that while a 3rd party professional letter certifying accredited investor status is not itself part of the accredited investor definition, he can be used to evidence one’s accredited investor status.- Under this method, the investor can have a third party licensed attorney, CPA, investment adviser, or broker-dealer provide a letter certifying that they are accredited (based on either the income criteria or net worth criteria)

Types of Investments Available to Accredited Investors

* Startups – angel investors qualifying as accredited investors can invest in private companies and startups

* Private equity – usually involves raising capital from institutional and non-institutional investors in the arena of nonpublic investments

* Real estate crowdfunding – accredited investors almost exclusively have access to these real estate platforms

* Hedge funds – accredited investors alone have access to these hedge fund investments

Now you may know little more about how to get accredited investor status. Making an investment as an accredited investor will leave you largely unprotected in terms of federal regulations. It will be your responsibility to conduct your investment analysis with the proper due diligence in order to understand what you are doing and the potential consequences of making your investments. This may require you to obtain the help of certain advisors such as accountants and attorneys whom you will have to pay, which may also reduce your net return on investment.


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