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Do You Want to Become an Accredited Investor? Here’s How

An accredited investor in the United States is permitted by law to invest in securities not registered with the Securities and Exchange Commission. Accredited investors may be either individuals or entities if they fulfill the investor accreditation requirements set forth by the SEC. Below we cover the process of how someone would start the process to become an accredited investor.

  1. Calculate Net Worth

Generally speaking, the net worth calculation consists of subtracting total liabilities from total assets, and must not include the value of your primary residence, according to the SEC.

  1. Collect Financial Documentation

You will have to collect documents that demonstrate your net worth and/or your yearly salary. This may involve gathering copies of bank statements, tax returns, retirement or other investment account statements, or your credit report.

  1. Obtain Verification

Once you have completed steps one and two above, the next step is to obtain verification. Per the SEC, when issuing securities, companies must take “reasonable steps” to prove the qualifications and credentials of the investor.

When obtaining accredited investor verification you will need to provide financial and personal information and the documentation you gathered in the first step as proof of your financial status. Then, you will need to sign the questionnaire. Be sure to retain a copy for yourself.

Prospective accredited investors seeking to qualify through the financial tests of net worth or income must meet the qualifying standards established by the SEC.

That sums up in brief form what is necessary to become an accredited investor through the financial qualification avenue. A third-party investor verification service can help make this process much easier, working on your behalf to help you get verified as an accredited investor.

Now, let’s look briefly at other ways to qualify for accredited investor status as an individual.

Other Ways to Gain Accredited Investor Status

Although many prospective investors will follow the standard process to qualify through financial qualification, there are other ways to obtain accredited investor status if the financial avenue is not feasible or preferable. Some additional ways in which an individual may become an accredited investor are given below.

A beneficiary of a trust that has more than $5 million in total assets may be an accredited investor. Executives, directors, and partners of a securities firm may be considered accredited investors, but only for the investment of the issuer. Also, professionals in the finance industry with FINRA Series 7, 62, or 85 licenses are accredited investors.

If you want to become an accredited investor, consider all of the various ways mentioned above that can make that possible.