Unlock Exclusive Investments: Your Guide to Qualifying as an Accredited Investor

New and existing investors should be considering how to create powerhouse portfolios. 

But to get access to exclusive opportunities, you’ll need to become accredited. 

What is an accredited investor?

An “accredited investor” may be an individual or business entity that is legally allowed to trade securities not registered with financial authorities. 

Essentially, you get access to investments and opportunities that the average person does not have. 

This privileged access is granted by satisfying specific requirements related to: 

• Net worth
• Asset size
• Governance status or professional experience

In the U.S., the Securities and Exchange Commission (SEC) uses the term “accredited investor” to define individuals who have certain professional certifications, designations, or credentials, as well as those who are “knowledgeable employees” of a private fund.

Keep reading as we discuss how to qualify as an accredited investor and start investing with Marquee Funding Group’s exclusive fund. 

How can someone become an accredited investor?

To verify accredited investor status, individuals or entities must provide documentation to prove their eligibility. 

The verification process is typically the responsibility of the issuer of the securities offering, and it involves taking “reasonable steps” to confirm the investor’s status. 

Step-by-step guide to becoming an accredited investor

Here’s how individuals or entities can verify their accredited investor status.

1. Gather necessary documentation

Depending on the method of verification, individuals may need to provide documents such as: 

• Tax returns
• Pay stubs
• Financial statements 
• IRS forms
• Credit reports
• Or other evidence of income and net worth

2. Choose a verification method

• Insider method: If an individual has a prominent role within the securities issuer company (e.g., director, executive officer, or general partner) they are considered an accredited investor and the issuer can use publicly available or internal information to confirm this status.
• Income method: Individuals can demonstrate their accredited investor status by providing evidence of an income that exceeds $200,000 (or $300,000 with a spouse) in the most recent years, along with a reasonable expectation of an equal level of income in the current year.

3. Complete the verification process

• Provide the necessary information and documentation to the entity responsible for verification
• Await the verification results, which typically take 1-2 business days to complete
• Upon successful verification, individuals will receive a letter certifying their accredited investor status

4. Maintain compliance

It’s important to ensure that the verification process complies with federal law requirements and that all necessary information is provided for a thorough and accurate assessment of accredited investor status.

Alternatives: Third-party verification and self-certification

Self-certification is another method used to verify accredited investor status. 

Companies can also use third-party services that specialize in verifying accredited investors. 

These services may require individuals to provide supporting documents and complete a verification process.

Self-certification for investor accreditation

The process of self-certification to become an accredited investor essentially involves providing sufficient evidence to support the investor’s accredited status. 

While there is no formal certification or exam, the Securities and Exchange Commission (SEC) requires any individual, no matter what path they choose to take to become accredited, to meet certain criteria regarding income, net worth, or professional experience. 

The self-certification process typically involves: 

• Creating an investor account with a verification service
• Answering questions about the qualifications as an accredited investor
• Providing evidence to support the answers 

After the necessary information is uploaded, the investor receives notice of verification, usually within 1-2 business days. 

The SEC’s Rule 506 allows self-certification of investors to become accredited, and during the five years, investors may self-certify that they remain accredited.

Third-Party Verification

• Process: Many issuers choose third-party verification options, where firms independently confirm an investor’s financial data and issue a report. This can involve providing evidence supporting the investor’s accredited status and completing a verification process.
• Documentation: Investors may need to upload evidence supporting their accredited status, such as tax filings, pay stubs, or letters from accountants or employers confirming their income.

Significance

Third-party verification offers a more rigorous and independent confirmation of an investor’s accredited status. This assures the issuer and potentially streamlines the verification process.

These methods serve to ensure compliance with regulatory requirements and provide assurance regarding an investor’s accredited status. 

The choice between self-certification and third-party verification depends on the preferences of the issuer and the specific circumstances of the investment opportunity.

What are the benefits of being an accredited investor?

Benefits of being an accredited investor include:

1. Access to exclusive opportunities: Accredited investors have access to a wider range of investment opportunities not available to the general public, such as:
   1. Private Equity
   2. Hedge funds
   3. Venture capital
   4. Real estate syndication
2. Potential for high returns: These exclusive investment opportunities often come with the potential for higher returns, which can contribute to the growth of an investor’s wealth.
3. Increased diversification: Accredited investors can diversify their portfolios by investing in a different class of assets—real estate, private equity, and hedge funds—and possibly reducing overall investment risk.
4. Exemption from SEC registration: Accredited investors are exempt from certain SEC registration requirements, allowing them to invest in private placements and other offerings not available to non-accredited investors. 
5. Financial advantage: Accredited investor status provides a financial advantage, as it allows access to investments that others with less wealth do not have access to, potentially leading to further wealth accumulation.

While being an accredited investor offers these advantages, it’s important to note that it also comes with risks, such as: 

• High-risk investments
• Larger minimum investment amounts
• Increased performance fees
• Long capital lock-up times 

Therefore, individuals should carefully consider these factors and seek professional advice before pursuing accredited investor opportunities.

Is becoming an accredited investor right for you?

The process and criteria to become an accredited investor may not be quite as easy as filling out a bank account application, but it might well be worth it for you. 

Much of your decision will depend on what your financial goals are and where you see yourself, financially and personally, in the years to come. 

Getting investment advice from a professional can go a long way to sorting out the puzzle of your investment portfolio.

To that end, we encourage you to reach out to Marquee Funding Group. 

As experts in overall investments—and private real estate investment funds like mREITs in particular—we can provide valuable insights into the options that investors might have available to them.

Fill out an application to start investing with Marquee Funding Group. 

There’s no cost or obligation to the application, and it could mean you’re achieving an ever brighter financial future than you could imagine.