At Caliber, we pride ourselves on leading the market in providing individual accredited investors with well-structured alternatives to traditional investments.
What is an Accredited Investor?
As per the Securities Act of 1933 and defined by the U.S. Securities and Exchange Commission (SEC) in Rule 501 of Regulation D, the following qualify as an accredited investor:
- An individual with income of $200,000 per year (for the past two years) or $300,000 when combined with a spouse. There also must be a reasonable expectation of the same or increased income level for the current year.
- An individual or joint-with-spouse net worth greater than $1 million, excluding the value of the person’s primary residence.
- Individuals who are “knowledgeable employees” of a private fund
- SEC- and state-registered investment advisers.
- A private business development company or an organization with assets exceeding $5 million
- An entity that consists of equity owners who are accredited investors. However, an organization cannot be formed with a sole purpose of purchasing specific securities
- A person who can demonstrate sufficient education or job experience showing their certifications, designations, credentials or other professional knowledge of unregistered securities, they too can qualify to be considered an accredited investor
- A trust with total assets over $5 million not formed for the specific purpose of acquiring securities and whose purchase is directed by a person who has such knowledge and experience in financial and business matters that he or she is capable of evaluating the merits and risks of an investment
- Investment company or business development company registered under the Investment Company Act of 1940
- Broker-dealer registered under the Exchange Act
- Small business investment company licensed by the Small Business Administration
- Any bank, savings and loan association or insurance company qualified by specifications defined in the Securities Act
- A general partner, executive officer, or director for the company that is issuing the unregistered securities.
Benefits of Accreditation
Accredited investors can invest in certain unregistered investments such as private placements, hedge funds, venture capital and private equity real estate funds like those offered by Caliber. The regulations were initially created by the SEC as a way to protect investors who may not be able to weather the financial risks associated with unregistered securities. Because of their high net worth, accredited investors are considered more capable of taking on increased risk and more sophisticated in their investment knowledge.
New Laws Make Accreditation More Accessible
The SEC recently reported updates to the accredited investor guidelines that widen the definition to include individuals who can certify their status as a capable, knowledgeable investor. Additional amendments include:
- Limited liability companies with $5 million in assets may be accredited investors and add SEC- and state-registered investment advisers, exempt reporting advisers, and rural business investment companies (RBICs)
- Any entity, including Indian tribes, governmental bodies, funds, and entities organized under the laws of foreign countries, that own “investments,” as defined in Rule 2a51-1(b) under the Investment Company Act, in excess of $5 million and that was not formed for the specific purpose of investing in the securities offered
- “Family offices” with at least $5 million in assets under management and their “family clients,” as each term is defined under the Investment Advisers Act
- “Spousal equivalents,” who may pool their finances for the purpose of qualifying as accredited investors.
Other Investment Options
Not everyone can qualify as an accredited investor. In fact, the bulk of the population falls into the non-accredited bucket, but there are still plenty of options to get in on the investment game. Things like crowdfunding and index funds are open to non-accredited investors as well as the relatively new Regulation A+ offerings.
Created through the JOBS Act of 2012, Regulation A and A+ (Reg A+) creates an opportunity anyone to invest in private companies. Similar to an IPO, a Reg A+ campaign is a public offering, but makes purchasing shares of the company available to the general public, not just accredited investors.
Where Does Caliber Fit?
In addition to working with accredited investors, Caliber supports registered investment advisors and wealth managers seeking alternative investments for their clients. Operating under the principles of integrity, responsibility, discipline and transparency, Caliber provides its more than 500 accredited investors with well-managed, diverse, asset-based investment strategies.
For more information and additional guidelines about accredited investor qualifications, you can explore SEC’s website here.
Interested in learning more about the investment opportunities offered by Caliber? Contact us today.