Accredited Investing: Now Available to More Investors

Being an accredited investor allows one to access and make investments not available to every individual investor. This access has, for the longest time, been limited to a small amount of people, all who could invest in vehicles outside “traditional markets.”

After decades of limiting the definition of who can be an accredited investor, the SEC recently made important changes that allow significantly more investors to qualify as accredited. This ultimately opens a world of investment opportunities to millions of people and institutions who previously were without access.

Who were accredited investors?

For the longest time, institutional investors were defined as investors meeting the following criteria:

A. Investors with earned income that exceeded $200,000 (or $300,000 together with a spouse) in each of the prior two years, and reasonable expectation of the same for the current year,

OR

B. Investors with a net worth over $1 million, either alone or together with a spouse (excluding the value of the person’s primary residence).

As you can see, this left quite a few people unable to make accredited investments, even if they did so for clients or had the financial know-how to do so.

Who can be an accredited investor today?

As of December 9, 2020, the definition of accredited investor widened to include certain investors demonstrating financial literacy, know-how, and history in the world of finance. This includes (and is limited to):

  • Investors with certain professional certifications, designations, and/or credentials, including Series 7, Series 65, and Series 82 licenses while qualifying as “natural persons.” (Investors with other licenses are to be considered and added in the future.)
  • “Spousal equivalents,” or spouses of accredited investors who pool their assets along with said investors to meet the previous net worth and/or income requirements for accredited investors. (Eg. If you are married to an accredited investor and share monetary resources, you are now also an accredited investor.)
  • Those who are “knowledgeable employees” of a private fund.
  • Limited Liability Companies (LLCs) and Family Office entities with $5 Million assets under management. SEC- and state-registered investment advisers (but not reporting advisors) of these entities can also now be considered accredited investors.
  • Entities including Native American tribes, governmental bodies, funds, and entities “organized under the laws of foreign countries” with investments over $5 million — as long as they  were not formed solely to invest in a specific accredited investment.

What’s Next?

These changes to the accredited investor definition are the first changes since 2012, and only the second change since the legal definition of an accredited investor came to be in 2020. As the SEC press release states, future amendments to the definition can include different financial certifications. Percent will continue to update our site and services accordingly if and when more investors are considered accredited in the future.

For more on what it means to be an accredited investor, read our accredited investing primer. As always, all accredited investors can continue to access exclusive investment opportunities with zero fees, only on Percent.

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