SEC Accredited Investor Verification – Protecting Equity Investors From Inherent Risk

by | Jan 3, 2018 | Money and Finance

Compared to only a few years ago, equity investors now have greater opportunity to diversify their investments across different asset types. Equity investing has now become much simpler through online platforms that make the process more efficient and secure than ever. Regardless of the asset in play, the risks associated with equity investing are still present, however, the standard of SEC accredited investor verification status still holds for the protection of individual investors.

In 2012, the JOBS Act brought in new opportunities for the equity and real estate investing market by giving companies the ability to market private placement in a much broader manner than before.

As an investor, you may certainly want to understand if you are accredited and how you can obtain SEC accredited investor verification.

Defining an Accredited Investor
In brief, an accredited investor according to the SEC’s definition is an individual who:

Possesses an earn income greater than $200,000 (or $300,000 with a spouse) in both of the last two years, with the expectation of the same income in the current year, or
Possesses a net worth greater than $1 million (alone or with a spouse)
1. There are also other categories for individuals that don’t usually apply, and there are a slew of additional categories for entities as well.

The definition of accredited investor mentioned above comes with some qualifications. In 2010, the Dodd-Frank Act prohibited an individual’s primary residence from inclusion toward that person’s net worth for the purposes of SEC accredited investor verification. This served to restrict the number of people defined as an accredited investor after 2010. As well, some liabilities connected with the individual’s homeownership could be placed against their net worth.

Viability of Status
Accredited investor status can be obtained through disclosure of personal assets, or from a broker-dealer, investment adviser, CPA, or personal lawyer – however, accreditation is only valid for a maximum of three months for the purposes of investing in an additional project through the general solicitation process.

Thus, it can be seen how accredited investor status protects the investor from the inherent risks involved with equity investing.

Recent Posts



Related Posts