How to Achieve Accredited Investor Certification

Accredited investors may be individuals or certain types of entities with a required level of sophistication to purchase securities that are not under the legal framework that protects the standard investor in the publicly traded stock market. These include private equity funds, angel investments, venture capital, real estate investment funds, hedge funds, and specialty investment funds, including those associated with cryptocurrency. Accredited investors are allowed to invest in complex, lightly regulated, opaque, or otherwise unregistered with an authoritative financial organization. Achieving accredited investor certification may be accomplished in multiple ways.

Accredited Investors and Companies

A company has the option to remain privately owned. As such, it can bypass the normal requirements of a publicly traded company and trade through an exemption. One of these exemptions is the ability to offer securities to accredited investors.

Accredited Investor Qualification Requirements

According to the SEC, one of three common requirements must be met in order to achieve accredited investor certification. They are:

  1. Income Qualification

The individual must have earned over $200,000 USD each year over the past two years, with the expectation of earning the same or more in the current year. The income requirement increases to $300,000 USD if seeking to qualify with a spouse or spousal equivalent.

  1. Net Worth Requirement

The individual must possess a net worth of more than $1 million USD, either single or with a spouse or spousal equivalent, excluding the value of the primary residence.

  1. Professional Credentials or Other Qualifications that Show Competency

Someone deemed a knowledgeable employee of an investment fund may qualify as an accredited investor. One may qualify as an accredited investor by showing investment expertise through obtaining Series 7, 65, or 82 licenses.

Accredited Investor Certification

Even though the requirements for achieving accredited investor certified status are stringent, there is not a formal process laid out by the SEC for becoming this caliber of investor. Individual companies are responsible for screening the credentials of investors before permitting them to purchase the securities they offer.

In brief, this screening process will often include a request for proof of income from a tax return or other documents or proof of net worth from assets and a credit report. Also, companies may ask for proof of the investor’s qualifications in the industry and past experience.