Why is investor accreditation important?
Whether you’re a seasoned investor or still sharpening your strategy, you may have come across certain investment opportunities that were restricted to accredited investors and wondered whether you qualify. It’s understandable, because both the criteria to be considered and the process of verifying one’s accredited status might seem outwardly opaque, but it’s an area certainly worth exploring given the potential access to opportunities that aren’t otherwise available to non-accredited investors.
The SEC sets accreditation standards to protect investors
Accredited investors have a certain level of income or net worth or professional certifications — deemed by financial regulators as a proxy for “sophistication” — to be presumptively viewed as capable of navigating complex financial products.
To understand what it means to be an accredited investor, it’s important to understand the Securities and Exchange Commission’s (SEC) role in the financial markets. The SEC is an independent government regulatory agency, and one of its primary functions is to protect investors from fraud and manipulation. By defining “accredited investors,” the SEC restricts certain securities offerings that are subject to less regulatory scrutiny, like unregistered offerings, to only those investors they deem financially secure and sophisticated enough to assume the potential risks associated with these types of offerings.
Are you an accredited investor?
Use our interactive tool to walk through the accreditation criteria for the various methods of investing and see if you qualify!