An accredited investor is a person or an entity with a special investment status set according to the laws of financial regulation. Regulation is set in place to protect investors from risk and accredited investors are perceived to have enough income, assets, net worth and/or investment proficiency to sustain the loss in the case of losing the capital invested. These accredited investors range from wealthy individuals to corporations and banks. Non-accredited investors who do not hold the required wealth are not entitled to undertake higher risk investments in hedge funds, venture capital and angel investments.
In order to qualify in the United States as an accredited investor as it is written in Section 501 of the SEC (Securities Act) of 1933, the party must earn at least $200,000 per year (or have a combined spousal income of $300,000) for the past two years, or have a net worth of $1 million which does not include the value of one’s primary home, or lastly have a trust fund greater than $5 million.
So what are the opportunities that are unlocked for accredited investors? In accordance with the passing of the J.O.B.S. Act, Title II of 2013, companies can offer accredited investors investment opportunities without the company having to register their securities with the SEC. This provided a huge breakthrough for accredited investors and opened the door for more large scale investment opportunities and highly lucrative deals which were not open prior to the majority of the population. This particular title of the J.O.B.S. Act also lightened the burden of companies looking to raise capital affording them the saving of costs and time to apply for the regulatory filings of the SEC. Although when it come to the later passing of Titles III and IV of the Act, it is now possible for non-accredited investors to invest via crowdfunding over the internet, although there is a heavy cap in place limiting investment amounts. The non-accredited investor may only invest a small percentage of their yearly earnings and this amount fluctuates from state to state.
Opportunities for Accredited Investors
Private investors have the chance to provide capital to small businesses in order to pump the needed funding into the operation to grow the next level. The angel investor’s capital is provided in exchange for a stake in the company in the form of equity. Over and above the investment, the investor may receive a place on the company board if they are knowledgeable about the industry, depending on the size of the stake acquired and the terms of the investment.
A hedge fund is made up of a number of investment derivatives hedged across a number of investments in order to mitigate risk. These are generally suited for larger investors and institutions, however there is also an opportunity for accredited investors to enter the game. Some hedge funds go over and above the SEC guidelines and verify whether these accredited investors are in fact “Qualified Purchasers”. A Qualified Purchaser has a lot deeper pockets than an accredited investor, and the hedge funds may demand an amount to invest which is over and above the investor’s capabilities.
Crowdfunding and Social Investment Networks
As mentioned previously, the new Titles of the J.O.B.S. Act opened up crowdfunding to unaccredited investors however the amounts are capped with stringent limitations which do not apply to the accredited investor. Utilizing these investment platforms, it is possible for the investor to diversify across a large range of projects, providing for far more rapid growth than stocks or bonds.
iintoo is a social investment network which provides accredited investors with real estate investment opportunities from as low as $25,000 across a range of asset classes. iintoo is a superior technological platform, enabling equity deals in exit oriented projects which have undergone due diligence and forecast double-digit returns.