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The Securities and Exchange Commission (SEC) recently made an intriguing announcement that allows anyone to become an accredited investor. Effective as of December 8, 2020, Series 65 (Investment Adviser Representative) license holders will qualify as accredited investors. This creates a significant opportunity for investors who could not otherwise achieve an accredited status.
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Why Is This Important?
Some of the most lucrative alternative investment options are restricted to a group of investors who meet specific requirements. These opportunities include private equity, venture capital, angel investments, and certain real estate deals. The existing rules protect investors by ensuring a level of sophistication and capacity for financial loss.
Per the press release, the SEC recognized a public good in allowing more private individuals to invest in small businesses. As the release states, “private capital markets are important to investors and issuers of various types, as well as our economy more generally…small- and medium-sized businesses often, and increasingly, rely on local sources of capital, particularly at the seed and initial growth stages.” With this foundation now laid, how can investors take advantage?
How to Become an Accredited Investor
Prior to the recent announcement, an accredited investor would need to fall into one of the following categories:
- Earning more than $200,000 in annual income for the previous two years and an expectation of earning the same or more during the current year.
- A net worth of more than $1 million.
- A general partner, director, or executive officer for a company that sells unregistered securities.
As you can see, the world of accreditation has been somewhat exclusive. The SEC announcement will change this, as anyone, regardless of their income, net worth, or business affiliations, can now obtain a Series 65 license to achieve an accredited status.
Lowering the Bar to Certain Investments Through Series 65
If you want access to investments previously restricted to accredited investors, you can earn a Series 65 license simply by completing the Series 65 exam. This means anyone is a mere 130 multiple choice questions and 180 minutes away from becoming an accredited investor. As of this writing and according to FINRA, 94/130 (72.3%) correct answers constitute a passing score.
The Series 7 and Series 82 also provide alternative avenues to the traditional accreditation requirements, but, in addition to their own exams, these licensures require a FINRA affiliation and sponsorship as well as having to pass the Securities Industry Essentials exam. Considering those corequisite hoops, the Series 65 may offer the easiest path for those interested in seeking accreditation.
Make Your Tax-Advantaged Plan an Accredited Investor
Did you know that your self-directed retirement account can also become accredited? Your account’s accreditation is based on your own personal accreditation, either through a Series 65 or the established accreditation criteria. The benefits of your account becoming pre-qualified as an accredited investor includes access to additional investments as well as expedited funding for your investment of choice.
If you choose not to pursue a Series 65, you can also become accredited through NDTCO’s relationship with Parallel Markets if you meet the income and earning requirements. Log into the Client Portal and go to “Profile” to learn how Parallel Markets can help you become pre-qualified and earn free accreditation for your retirement account.
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