Passive asset-based lending opportunities have skyrocketed due to the emergence of professionally managed platforms. These opportunities include real estate syndication, and much more. Only accredited investors have access to these opportunities. At one time, only those in high-income brackets could qualify as accredited investors. That has recently changed. How to become an accredited investor can now be explained through knowledge or as an entity instead of only through wealth.
Qualifying Based on Income or Net Worth
A prospective investor can qualify as an accredited investor by meeting either the income or net worth criteria. Based on income, the investor must have earned more than $200,000 USD alone or $300,000 USD with a spouse or spousal equivalent in a joint filing in each of the previous two years with the expectation of earning the same or greater amount in the current year. Having a net worth in excess of $1 million USD as an individual or jointly will also qualify you as an accredited investor.
Qualifying Based on Knowledge
The SEC added knowledge as a means to accredited investor status. With certain professional designation, certifications, or other credentials provided by an accredited educational institution, the prospective investor can claim accredited status. Specifically, individuals obtaining and in good standing with Series 7, 65, or 82 licenses can qualify as accredited investors.
Qualifying as an Entity
How to become an accredited investor also applies to entities. The following entities can qualify as an accredited investor:
- Financial institutions
- Certain kinds of insurance companies
- A limited liability company (LLC0 or corporation with total assets greater than $5 million and not created for the sole purpose of obtaining the securities offered
How to Become an Accredited Investor with High Net Worth or Income
The knowledge route is the best path to take if you do not qualify under the income or net worth criteria. The Financial Industry Regulatory Authority (FINRA) administers the Series 65 exam. This organization licenses individuals in the U.S. to operate as investment advisors. To meet the SEC accredited investor definition, you need to pass the Series 65 license test and also be in good standing with the license.
Obtaining and operating in good standing under a Series 7 (General Securities Representative) or a Series 82 (Private Securities Offering Representative) license also enables you to become an accredited investor.
Consult with the regulator in your state for any specific requirements. This new option has answered the question of how to become an accredited investor. Through the knowledge route, you can enter a new world of investment opportunities, including venture capital funds, asset-backed lending, and angel investments.
