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 due to the previous income and earning requirements.

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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 income and asset requirements. These opportunities include private equity, venture capital, angel investments, and certain real estate deals. The current set of rules, enacted by law and imposed by the SEC, protects investors by ensuring a level of sophistication and capacity for financial loss.

According to the press release accompanying this announcement, the SEC felt expanding the opportunity for private investors to provide much-needed capital to smaller and earlier-stage businesses would be a public good. 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...” The SEC understands the need for local support and is enacting changes to broaden the opportunities for individual investors.

Requirements for Accreditation

Prior to the recent announcement, an individual would need to fall into one of the following categories to be considered an accredited investor:

• 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.

Accreditation for Your SDIRA

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 your 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.

Stay in Touch!

Do you have questions or concerns about your NDTCO account? Log in to your client portal at portal.ndtco.com to send a secure and direct message to our staff.