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Accredited investors can participate in some exclusive securities offerings under federal securities laws. These investment instruments are restricted to accredited investors only to ensure that all involved investors are financially savvy and capable of handling their financial affairs or bearing the risk of loss.
Corporations and private funds, such as venture capital funds or hedge funds, participating in these exempt offers are not required to reveal mandated information to accredited investors, unlike offerings regulated by the SEC in which specific information must be given. You ought to know that these financial instruments come with unique risks. Read on to learn the significance and criteria of being an accredited investor.
What Is The Significance Of Being An Accredited Investor?
SEC-recognized investors have access to investment instruments that most other investors do not, and with the proper knowledge, they may profit handsomely from their investments.
The financial authorities do not want the typical investor to believe they may become wealthy just to lose everything. Although it is their responsibility to ensure that investors understand what they are entering into, there is very little supervision protection regarding high-risk, poorly regulated products. This is not the case with accredited investors; they do not require such supervision as they are knowledgeable and have the resources to back these high-risk offerings.
Prerequisite To Being A SEC-Recognized Investor
According to SEC regulations, entities and people can be designated accredited investors, although the criteria vary. An individual must fulfill at least one of the following conditions to be considered an eligible investor:
- Without considering the value of the principal dwelling, net worth surpasses $1 million, either independently or when coupled with a spouse.
- Earning more than $200,000 ($300,000 if coupled with a spouse) each year over the past two calendar years, proving their ability to sustain these income levels this year.
- Possess particular professional certificates or credentials, such as a FINRA Series 65, Series 7, or Series 83 license, or have the title of “knowledgeable employee” for a private fund.
How To Invest In High-Profile Investments If Not Accredited By SEC?
A non-accredited investor may not be able to access all the opportunities that open up for an SEC-recognized investor, but there is good news. Ordinary investors now have access to several fantastic investment opportunities previously only available to accredited investors, such as fine art.
Several reputable platforms are working to democratize the high-end artwork investment market so that everyone may benefit from one of the most attractive alternative assets available today, which were once accessible only to them. There returns from investing in artwork can be as high as 28%, which is higher than standard investment options available to non-accredited investors.
Final Thoughts
Every kind of investment brings its fair share of risk. But when investing wisely, the increased risk can increase profits. Being an accredited investor has its unique perks and investment opportunities. But remember that these opportunities play a “high-risk, high-reward” game. If this is not what you prefer, you can always stick to non-accredited investment financial instruments, which can also bring in returns if invested carefully.
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Disclaimer
The information contained above is provided for information purposes only. The contents of this article are not intended to amount to advice and you should not rely on any of the contents of this article. Professional advice should be obtained before taking or refraining from taking any action as a result of the contents of this article. Sandra Hinshelwood disclaims all liability and responsibility arising from any reliance placed on any of the contents of this article.
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