Questions Business and Entrepreneurship

How to become an accredited investor?

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Airtract

Jyoti Shiva

Know your worth

To become an accredited investor, it is not necessary for you to pass any particular examination or test. There is no requirement of an investor license as well. But to qualify and become an accredited investor one must fulfill specific requirements that are laid by the Securities and Exchange Commission (SEC).

 Not only this, an individual can even be asked to demonstrate to the investment firm that he is in a position to invest in a particular product. Specific necessities are needed to be fulfilled by the person either individually or in a conjoint manner which includes the spouse to become an accredited investor. The requirements include:

1. A person is having an individual income exceeding $200,000 in the recent two calendar years or is having  a joint income with the spouse exceeding $300,000 in each of the two years and can provide the validation that the same income level can be guaranteed in the current year  than the person can become an accredited investor.

Thus, the person who is having an individual income of $150,000 can become an accredited investor if he has a joint income with the spouse which exceeds $300,000. But it should be noted that the person should meet the income requirements in all the three years with the same method that is either individually or jointly.
For example: if Mr. X who is a married man made $230,000 two years ago when his wife was unemployed. And last year his income was $150,000 and his wife earned 210,000 making a total which is exceeding $300,000. This situation may seem like the couple can meet the requirements of SEC, but they could not become an accredited investor as they have not used the same method in all the three years.

2.  A person who is having an individual net worth which exceeds $1,000,000 or even a joint quality that exceeds $1,000,000 can become an accredited investor. But the primary residence should not be included while estimating the net worth. And the liabilities won't be deducted from the primary home unless they can be incurring within the past 60 days.

3.One can even be an accredited investor if one is an insider, meaning if you are a director, executive or the partner of the issuer of the securities that you can be an accredited investor.

4. According to the SEC if you have trust with total assets that exceed $5,000,000, then the individual is entitled to become an accredited investor.

5. If a company fulfill the minimum requirement of $5,000,000 and a charitable trust has assets that worth more than $5,000,000, it is possible for them to portray the role of accredited investors. 

Airtract

DR NAVEEN PRASADULA

Tagline Not available

An accredited investor is an individual or a business entity that is allowed to trade securities that may not be registered with financial authorities. Accredited investors include natural high net worth individuals (HNWI), banks, insurance companies, brokers and trusts.

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