How to Be an Accredited Investor Without High Income or Net Worth
For some, the accredited investor qualifications can be unfair because they do not have enough wealth to qualify for this type of investor’s status. However, the recently updated Securities and Exchange Commission (SEC) rule changes explain how to be an accredited investor without meeting the high net worth or income criteria.
Reasons for Accredited Investor Restrictions
The SEC has imposed the accredited investor restrictions at least in part because of previous incidents of fraud. Unfortunately, some individuals wish to take advantage of investors, promising them high returns for investments in faulty opportunities. Through its regulations, the SEC attempts to prevent this fraudulent activity.
The original qualifications for how to be an accredited investor were based on high net worth and income. However, these restrictions left many people excluded, leaving the rich to have exclusive access to asset-backed investments.
Now, with added qualification criteria, high-income earners and those with high net worth are not the only ones to have access to these potentially highly profitable opportunities.
Accredited Investor Qualifications Based On Knowledge
In its recent revisions to the accredited investor criteria, the SEC added knowledge criteria to the possible qualifications. Someone can qualify as an accredited investor by having specific professional certifications, designations, or other credentials provided through an accredited educational organization. The approved professional designations include persons in good standing with the Series 65, Series 82, or Series 7 licenses. The SEC may also add other titles, certifications, or credentials in the future if it so chooses.
Knowledgeable employees of private funds, in addition to certain other entities (companies and institutions), may also qualify as accredited investors.
The Series 65 License
The easiest and fastest method of being an accredited investor and participating in private investments is through the Series 65 License. This is an exam provided by the Financial Industry Regulatory Authority (FINRA) and gives persons a license to operate in the U.S as an investment advisor. Once you pass the test and are granted your license, you must be in good standing to comply with the SEC’s accredited investor definition.
Anyone pursuing accredited investor status based on holding a Series 65 License should consult the rules issued by the FINRA and any applicable state rules.