There are a lot of misconceptions on who and what an accredited investor is, and what qualifies one to be listed in this category of investor class. Continue reading to learn more.
Join Chris Loeffler, Caliber CEO, as he shares Caliber’s journey from a small startup to a market leader in commercial real estate asset management and gives key insights on Caliber’s innovative investment approach, including self-directed IRAs and private loans.
There are various approaches utilized by Caliber, such as converting commercial spaces, investing in distressed real estate, and introducing pickleball facilities. In this podcast, Chris discusses the importance and intricacies of approaching opportunity, building investor trust, securing funding, transitioning to the public domain, and maximizing returns within Opportunity Zones.
Who Qualifies as 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 investor suitability requirements stated below represent minimum suitability requirements to qualify as an accredited investor:
Individual accredited investor stipulations
- Any natural person that has individual net worth or joint net worth with his or her spouse or spousal equivalent, of more than $1 million. “Net worth” means the excess of total assets at fair market value—including personal and real property, but excluding the estimated fair market value of a person’s primary home—over total liabilities.
- Any natural person that has an individual income in excess of $200,000, or joint income with his or her spouse in excess of $300,000, in each of the two most recent years and has a reasonable expectation of reaching the same income level in the current year. The term spousal equivalent shall mean a cohabitant occupying a relationship generally equivalent to that of a spouse.
Other entities’ accredited investor stipulations
- Any corporation, Massachusetts or similar business trust, partnership, limited liability company, or organization described in Code Section 501(c)(3) of the Internal Revenue Code not formed for the specific purpose of acquiring units, with total assets over $5 million.
- Any trust, with total assets in excess of $5 million, not formed specifically to purchase the subject securities, whose purchase is directed by a sophisticated person described in Rule 506(b)(2)(ii) of Regulation D under the Securities Act.
- Broker-dealer registered under Section 15 of the Exchange Act, as amended
- Investment company registered under the Investment Company Act of 1940 (the “Investment Company Act”) or a business development company (as defined in Section 2(a)(48) of the Investment Company Act)
- Small business investment company licensed by the Small Business Administration under Section 301 (c) or (d) of the Small Business Investment Act of 1958, as amended
- An employee benefit plan within the meaning of ERISA, if the investment decision is made by a plan fiduciary (as defined in Section 3(21) of ERISA), which is either a bank, savings and loan association, insurance company, or registered investment advisor, or if the employee benefit plan has total assets in excess of $5 million or, if a self-directed plan, with investment decisions made solely by persons who are accredited investors.
- Private business development company (as defined in Section 202(a)(22) of the Investment Advisors Act of 1940, as amended).
- Bank as defined in Section 3(a)(2) of the Securities Act, any savings and loan association or other institution as defined in Section 3(a)(5)(A) of the Securities Act whether acting in its individual or fiduciary capacity, or any insurance company as defined in Section 2(13) of the Securities Act.
- Plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, if such plan has total assets of more than $5 million.
- Entity in which all of the equity owners are accredited investors.
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:
- Natural persons holding in good standing one or more professional certifications or designations or other credentials from an accredited educational institution that the SEC has designated as qualifying an individual for accredited investor status.
- Any natural person who is a “knowledgeable employee,” as defined in Rule 3c–5(a)(4) under the Investment Company Act of 1940 (the “Investment Company Act”), of the private-fund issuer of the securities being offered or sold where the issuer would be an investment company, as defined in section 3 of such act, but for the exclusion provided by either section 3(c)(1) or section 3(c)(7) of such act.
- “Family offices,” as defined in Rule 202(a)(11)(G)–1 under the Advisers Act: (i) with assets under management in excess of $5 million, (ii) that are not formed for the specific purpose of acquiring the securities offered, and (iii) whose prospective investment is directed by a person who has such knowledge and experience in financial and business matters that such a family office is capable of evaluating the merits and risks of the prospective investment.
- “Family clients,” as defined in Rule 202(a)(11)(G)–1 under the Advisers Act, of a family office meeting the requirements in new Rule 501(a)(12) and whose prospective investment in the issuer is directed by such family office.
For more information about accredited investor qualifications, see the SEC’s website here or read the details of the final amendment ruling here.
Join Chris Loeffler, Caliber CEO, as he shares Caliber’s journey from a small startup to a market leader in commercial real estate asset management and gives key insights on Caliber’s innovative investment approach, including self-directed IRAs and private loans.
There are various approaches utilized by Caliber, such as converting commercial spaces, investing in distressed real estate, and introducing pickleball facilities. In this podcast, Chris discusses the importance and intricacies of approaching opportunity, building investor trust, securing funding, transitioning to the public domain, and maximizing returns within Opportunity Zones.
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. 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.
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 for 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.
UPDATE: Caliber’s online public offering is now closed. Have any questions? Please do not hesitate to contact us as we are always answering investor FAQs.
Phoenix Behavioral Hospital – An Opportunity Zone Asset Owned By Caliber
About Caliber
Caliber – the Wealth Development Company – is a middle-market alternative asset manager and fund sponsor with approximately $1.5 billion in assets under management and development. The Company sponsors private funds and private syndications. It conducts substantially all business through CaliberCos, Inc., a vertically integrated asset manager delivering services which include capital formation and management, real estate development, construction management, acquisitions and sales. Caliber delivers a full suite of alternative investments to a $4 trillion market that includes high net worth, accredited and qualified investors, as well as family offices and smaller institutions. This strategy allows the Company to opportunistically compete in an evolving middle-market arena for alternative investments. Additional information can be found at CaliberCo.com and CaliberFunds.co.
Click here to see Caliber’s current property portfolio.
If you would like to speak to someone about diversifying your retirement accounts, contact us at [email protected] or call (480) 295-7600 to schedule a call with a member of our Wealth Development Team.
If you would like to learn more about Opportunity Zone Investing, Caliber has put together a special guide that cuts through the myths and misconceptions and outlines the benefits, the risks, and the upcoming deadlines you must know to be able to participate. Get access to the guide here.
Investor Considerations
The information contained herein is general in nature and is not intended, and should not be construed, as accounting, financial, investment, legal, or tax advice, or opinion, in each instance provided by Caliber or any of its affiliates, agents, or representatives. The reader is cautioned that this material may not be applicable to, or suitable for, the reader’s specific circumstances, desires, needs, and requires consideration of all applicable facts and circumstances. The reader understands and acknowledges that, prior to taking any action relating to this material, the reader (i) has been encouraged to rely upon the advice of the reader’s accounting, financial, investment, legal, and tax advisers with respect to the accounting, financial, investment, legal, tax, and other considerations relating to this material, (ii) is not relying upon Caliber or any of its affiliates, agents, employees, managers, members, or representatives for accounting, financial, investment, legal, tax, or business advice, and (iii) has sought independent accounting, financial, investment, legal, tax, and business advice relating to this material. Caliber, and each of its affiliates, agents, employees, managers, members, and representatives assumes no obligation to inform the reader of any change in the law or other factors that could affect the information contained herein.
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