Accredited investors can participate in investment opportunities that are unavailable to the average investors. To gain this type of investor status, one must take the time to get verified. Companies can establish an investor accreditation program to help ensure they can verify and accept qualified investors – those who have the financial and other acumen to handle the risks associated with certain types of lucrative securities offerings.
The Ability to Raise Capital Through General Solicitation
An investor accreditation program can help a business raise important capital through general solicitation and advertising. To generally solicit, companies must execute reasonable steps to verify the accredited status of investors. A program set up specifically to facilitate investor accreditation is therefore very important.
Common Criteria Used to Verify Accredited Investor Status
Per the SEC, natural persons – in other words, everyday individuals – may have accredited investor status if they can establish a yearly income of $200,000 USD per year for the previous two years and an assurance of earning the same income or greater in the current year. If you earn $300,000 USD with a spouse or spousal equivalent, you and your spouse or spousal equivalent qualify as accredited investors.
If, as a natural person, you have a minimum of $1 million USD (either by yourself or with a spouse or spousal equivalent), you also qualify for accredited investor status. This net worth may not include the value of your primary residence. If you use your spouse’s assets to calculate the net worth, you must also take into account the liabilities of your spouse in the calculation.
Entities (not natural persons) may also qualify as accredited investors. Examples include:
- Companies having more than 5 million dollars and not created to buy securities of the offering in question, and
- Entities in which all of the equity owners qualify as accredited investors
Other means of qualification not discussed here are now available as well.
Determine If You Qualify for an Investor Accreditation Program
An important first step if you are a potential accredited investor is to determine you qualify through an accreditation program. The ways to obtain verification of accredited status vary. It is best to choose a method that is reliable and safe.