According to the U.S. Securities and Exchange Commission (SEC) regulations, only accredited investors that can invest in certain private securities offerings, such as private equity funds, venture capital firms, hedge funds, etc.
The problem is the requirements to have such legal status are hard to fulfill, as you need to meet all the SEC criteria, which also involves having either a wealthy assets portfolio or an abundant income.
You don’t own much capital and still looking for ways to become an accredited investor? Is it even possible? Let’s take a closer look.
What is an Accredited Investor?
An accredited investor (AI) can be both an individual or an entity, which is allowed to deal, trade and invest in financial securities by fulfilling some legal requirements, such as income, net worth, asset size, governance status or professional experience.
Here are three main ways on how to become an accredited investor:
You need to have a million dollars of assets in net worth (which includes cryptocurrency assets).
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You need US$ 200k of individual income or US$ 300k of joint income including your partner.
If you hold some type of insider position with the entity issuing the securities, you are also an AI.
You can prove that either providing SEC with official documentation or you can upload a corporate letter to them, using an official template, attesting that you have the conditions to become an AI.
The responsibility to verify and approve your AI status is in the hands of the security-issuing entity.
Is There Any Exemption to Help Non-Rich Individuals to Become AIs?
The SEC is responsible for investment security in the US jurisdiction, they require providers of securities to register their offerings into their mechanism. It happens because it’s the only way authorities have to offer legal protection for investors.
However, the SEC laws observers some exemptions as well, and luckily one of these cover the AI’s situation.
Why Are Accredited Investors Considered That Special?
Most startups in the crypto industry start by raising money from accredited investors only. It happens because individuals who want to expose themselves to the most profitable IEO, STO, and ICO-based investment opportunities necessarily have to be AIs.
So, how to surpass this issue without necessarily being rich? For someone with a low net worth or not enough income this can be a real dilemma.
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However, there are a few feasible solutions to achieve accredited investor status without necessarily being rich, as we will cover above.
How To Acquire AI Status Without Being Rich – Practicable Solutions Only
Although there is no obvious solution unless fulfilling the SEC requirements, there is plenty of room to strategical maneuver here and there, which can open the door for your AI status.
First, you can marry the right person. This advice is by no means intended to encourage marriage for self-serving reasons, but we must look at it from an analytical perspective. You can have a spouse whose income, when combined with yours, is enough to fulfill the SEC requirements regarding joint income. It can be quite interesting as the personal income ceases to be a primary factor.
Remember that, due to laws associated with the Dodd-Frank Act passed in 2010, the value of your primary residence doesn’t count to be summed up on your net worth, which also includes liabilities carried by the real-estate in question (with a few exceptions only).
So far, the Trump Administration is looking forward to undoing Dodd-Frank. Hence, there is still a possibility that someday residences will once again count toward net worth, regarding AI status.
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Another possibility is that, if you cannot individually fulfill all the SEC requirements to become an AI, you still have the possibility of becoming a member of an entity that does.
To acquire an AI status as an entity, the SEC regulation requires that it must either have over $5 million in assets (a venture fund or a trust, for example) or be made up entirely of AIs. We recommend you take some time to study this remarkable possibility.
Also, remember that small business investment companies might provide a feasible path to an AI status as well. Here, you can add up employee benefit plans, as well as other entities covered by the required definitions.
The good thing is you are considered eligible for AI status even if you are the associated partner of a general partner of the securities issuer, so never giving up is not an option.
Being an Accredited Investor (AI) can open the doors for several advantages in the crypto industry. Besides the legal status itself, there are other profitable deals such as gaining first-hand access to IEO, STO, and ICO-based investment opportunities.
The SEC regulations requirements to grant an individual with an AI status are somewhat unachievable for many investors out there, but there are some strategic maneuvers to sneak around, which would make the AI status a real possibility for a non-rich investor.