How to Become an Accredited Investor:
A person or a business entity who is allowed to deal in the securities, which are not registered with the financial authorities, are referred to as an Accredited Investor.
This is done by fulfilling requirements like income, net worth, asset size, governance status, or professional experience. The investor will get the opportunity to deal with such securities. The Securities and Exchange Commission will have its own terms under Regulation D. Investors are considered as highly sophisticated. They need less protection as compared to usual investors. So they are named as high net worth individuals, banks, insurance companies, trusts, etc.
Origin of Accredited Investor
Accredited is someone who has given exclusive opportunity to perform any activity by satisfying certain conditions. Securities are offered to the accredited investors as the cost of regulatory filings is very high, and companies prefer to offer it to them as compared to other securities.
What are the requirements?
The following are certain requirements for becoming an accredited investor. Those who have:
- The annual income exceeding $200,000, or $300,000 for joint income & for the previous 2 years with the wish of earning the same or more income in the current year. Individuals must earn income above the limits either alone or with a companion, based on the latest two years.
- The total assets surpassing $1 million, either separately or together with their spouse. The general partners, executive officer, director, or a related combination thereof for the issuer of unregistered securities can also be considered as an Accredited Investor.
- Those substances who are in personal business advancement organization or an organization with assets exceeding $5 million. Though the company cannot form on the basis of just dealing with these securities alone.
Note: The Regulation was edited by the US to include the registered brokers and investment advisors in the definition of accredited investor in 2016.
How to Become an Accredited Investor
There are no such requirements to become an accredited investor; nothing like filling the form, or a certificate for the same. The investor should know about the company issuing the securities. Then, the company will take charge to cross-verify about the client and its authenticity to be an accredited investor. The verification may include a questionnaire that provides for attachment of various documents like the financial statement, balance sheet, tax filings forms, and so on, to know the details better.
Conclusion
Though the markets on any day can play for you or against you. But the issuer always looks for someone who can pool money in their company and drive the results. Being an accredited investor itself is a title achieved, and the riches know how they can earn from this market. The market always needs people or entities like this to boost the market. The qualifying criteria set by agencies like SEC are designed to ensure that only the right competitor or substances take the high hazard, high prize way.
