Do You Need an Accredited Investor Certificate to Prove You Are An Accredited Investor? May18


Related Posts

Share This

Do You Need an Accredited Investor Certificate to Prove You Are An Accredited Investor?

Accredited investors may be persons or entities such as corporations or financial institutions that are permitted to invest in securities that are not registered with the U.S. Securities and Exchange Commission (SEC). The designation made for these types of investors is to help prove they have the financial sophistication to participate in these investments. One question that may come to mind is whether one needs an accredited investor certificate to demonstrate one has such an investor status. We will answer that question later below.

SEC Rule 501 under Regulation D of the 1933 Securities Act governs the rules on accredited investors. This Act made enhancements to the financial disclosure requirements, helping to ensure investors are correctly informed about the investments they are purchasing. It also strengthened regulations forbidding misrepresentation and fraud involving the sale of securities.

The Accredited Investor Exemption
The accredited investor exemption bypasses the protections provided with a registered securities offering by ensuring investors who participate in specific offerings have the necessary financial wealth and/or sophistication to sustain any potential losses.

Proving You Are an Accredited Investor
There is no accredited investor certificate issued that proves you have attained accredited investor status. Rather, companies that sell securities to investors are required to verify any investors qualify for this elevated investor status. This often means potential investors must provide certain financial statements, including tax returns, W-2s, and bank and brokerage statements – any of which will reveal income and net worth that either qualifies or disqualifies the investor.

Recent Modifications to the Accredited Investor Definition
The definition of accredited investors for persons and organizations has recently been expanded by the SEC. The new rules took effect in late 2020. Among the changes include allowing financial professionals who have Series 7, 65, and 82 financial securities licenses, along with “knowledgeable employees” of a private fund, to qualify as accredited investors.

In summary, becoming an accredited investor does not involve the awarding of a special accredited investor certificate indicating such a status. The status of an accredited investor is achieved by qualifying as one per the latest SEC requirements.