An accredited investor, in the context of a natural person, includes anyone who;
- earned income that exceeded USD 200,000 (or USD 300,000 together with a spouse) in each of the prior two years, and reasonably expects the same for the current year, or,
- has a net worth over USD one million, either alone or together with a spouse (excluding the value of the person’s primary residence).
On the income test, the person must satisfy the thresholds for the three years consistently either alone or with a spouse, and cannot, for example, satisfy one year based on individual income and the next two years based on joint income with a spouse. The only exception is if a person is married within this period, in which case the person may satisfy the threshold on the basis of joint income for the years during which the person was married and on the basis of individual income for the other years. If calculating joint net worth with a spouse, it is not necessary that property be held jointly. Calculating net worth involves adding up all your assets and subtracting all your liabilities. The resulting sum is your net worth.
The value of your primary residence is not included in your net worth calculation. In addition, any mortgage or other loan on the residence does not count as a liability up to the fair market value of there residence. If the loan is for more than the fair market value of the residence(i.e., if your mortgage is underwater), then the loan amount that is over the fair market value counts as a liability under the net worth test. Further, any increase in the loan amount in the 60 days prior to your purchase of the securities (even if the loan amount does not exceed the value of the residence)will count as a liability as well. The reason for this is to prevent net worth from being artificially inflated through converting home equity into cash or other assets.
In addition, entities such as banks, partnerships,corporations, nonprofits and trusts may be accredited investors. Of the entities that would be considered accredited investors and depending on your circumstances, the following may be relevant to you,
- any trust, with total assets in excess of USD five million, not formed to specifically purchase the subject securities,whose purchase is directed by a sophisticated person, or,
- any entity in which all of the equity owners are accredited investors.
The SEC does not require any specific verification method or process for accredited investor verification. Depending on the circumstances, the company may rely on a written confirmation from a third party to verify your accredited investor status. In order to verify your accredited investor status please provide to email@example.com a written confirmation of your accredited investor status obtained from any of the following third parties;
- a registered broker/dealer, or,
- SEC-registered investment adviser, or,
- licensed attorney, or,
- certified public accountant.
Such third party could be engaged directly by you (e.g.,your personal broker-dealer, investment adviser, attorney or certified public accountant). You can obtain information about a registered broker by visiting FINRA’s Broker Check website: https://brokercheck.finra.org/
You can obtain information about an investment adviser by visiting the SEC’s Investment Adviser Public Disclosure website: https://adviserinfo.sec.gov/
You can obtain information about a licensed attorney or certified public accountant by contacting the appropriate state bar or board of accountancy.