Accredited Investor- Any Advantages? How Do I Register As One?

[nico08]

Hi:

I was just trying to understand if there is any practical advantage to being defined as an SEC identified "accredited investor"? I mean, can I purchase investments with greater returns, lower risks, lower fees, etc? If so, can you provide any example of a specific investment opportunity that for an "accredited investor" is more attractive than it would be for an average (non-accredited) investor?

Also, how, exactly, do I register as an accredited investor? Do I register with the SEC or with a financial institution? If my eligibility is based on net worth, who reviews and approves the net worth asset inventory?

Thanks for your insight.

 

[ChiliPepr]

In simple terms, you do not need to register to become an "accredited investor". Firms have added reporting requirements when they sell to a "non-accredited investor".

If you want to invest with a firm that says "Accredited investor only", it is on them to verify you are.

The SEC website https://www.sec.gov/answers/accred.htm will give you more info, but the key points to an individual are:

1. a natural person who has individual net worth, or joint net worth with the person’s spouse, that exceeds $1 million at the time of the purchase, excluding the value of the primary residence of such person;
2. a natural person with income exceeding $200,000 in each of the two most recent years or joint income with a spouse exceeding $300,000 for those years and a reasonable expectation of the same income level in the current year; or
3. a trust with assets in excess of $5 million, not formed to acquire the securities offered, whose purchases a sophisticated person makes.

 

[AnIntentionalRoad]

There is no registration process. If you find an investment such as a hedge fund or private placement offering that you want to invest in, they will have a form for you to fill out stating your accredited investor status (at least 250K in income or 1MM in liquid assets, IIRC).

 

[haha]

Probably most of us here are accredited investors, but I want no part of any of the scams and risky schemes that are frequently marketed to "accredited investors".

If you have $100 million liquid, and some very solid connections, you may get to look at better opportunities.

But for most of us, being accredited investors is no more helpful than owning a Sky King ring.

Ha

 

[NW-Bound]

Hi:

I was just trying to understand if there is any practical advantage to being defined as an SEC identified "accredited investor"? I mean, can I purchase investments with greater returns, lower risks, lower fees, etc?...

More like someone who could afford to lose $1M or more without jumping off a high-rise or a bridge. Great potential returns come with a lot higher risk. There is no exception.

 

[AnIntentionalRoad]

As an accredited investor, I have invested in several startups that have great potential rewards over a 5-10 year period. They also have a high likelihood of becoming worthless. But if you have the knowledge and connections, you can reap some outsized rewards.

I invested a small amount (about 2 1/4%) in one about 5-6 years ago that may be getting acquired by a big name tech firm for 50-100MM in the next few months. Oh, it throws off about 80-100K in dividends to me each year, so if it doesn't get acquired, even better.

Typically, though, one should avoid these investments unless one knows what one is doing and can diversify the investments.

Hedge funds are another matter and the right ones can provide an investor with a nicely diversified set of alternative investments. But, again, one really needs to do their homework.

Also, I get the opportunity to purchase some pre-IPO shares, such as Twitter, if I so desire.

 

[trueblue]

My experience with crowdfunding sites that are open to accredited investors is that they don't ask to see your Vanguard statements or anything-- they just ask you to self-certify which category you fall in that makes you an accredited investor.

 

[kcowan]

The term often means (Too knowledgeable to invest with us!). Bypasses all those nice SEC requirements for reporting.