Wealthward Capital is a private equity investment firm that educates investors and provides institutional quality investments. We help technology employees grow their careers, build wealth and make an impact.
Accredited Investors And Investing
Many tech employees qualify as accredited investors and don't even know it. That's what happened to me! The status of being accredited isn’t only awarded for a person’s net worth, but also for how much you earn, including bonuses, RSU (Restricted Stock Units), and so on.
Only accredited investors are allowed to trade securities that aren't registered with the Securities and Exchange Commission (SEC) or the state-level regulator.
Many tech employees are compensated well, both in salary and in equity, but they sacrifice a lot for that money. I know, because I've been a tech employee for most of my career. It was after I went through an IPO that I realized I needed to understand the broader world of investment so that I could now make my money work for me.
ACCREDITED INVESTOR
ACREDITED INVESTING
A qualified purchaser is a person or family business that has at least $5 million invested. Qualified purchaser is a status measured on the size of investments, not on net worth. By definition, all qualified purchasers are already accredited.
Some investment funds seek only qualified purchasers for their investments. And there are also regulations in place that close certain investments off to investors who are not qualified investors, because of the extremely high risk involved in these investments.
How Much Can An Accredited Investor Invest
There is no limit to how many dollars an investor can invest in a Regulation D 506(c) offering. But there can indeed be limits imposed voluntarily by the investment itself. This is usually to prevent any single investor holding a controlling interest in the investment.
Regulation D refers to Regulation D of the Securities Act of 1933 regulation that regulates private funds. Regulation D essentially allows private companies to raise funds through equity and debt offerings without having to register these with the SEC—known as unregistered investments.
Rule 506(c) allows companies to perform general solicitation for their investments provided that all investors are accredited investors at the time they pay into the investment.
How do I prove accredited status?
You can prove your accredited investor status to the company offering you securities by providing a letter from your accountant, tax filing documents, pay stubs, bank statements, financial statements, or any other official document that proves you meet the necessary requirements.
The easiest way to prove you are an accredited investor is to get a letter from your accountant, attorney, or other tax professional.
The SEC does not carry out accredited investor certification or validation. It is the duty of the investment firm that is offering you the securities to ascertain your status. They will let you know what they need, to prove satisfactorily to themselves that you meet the requirements.
Why Does The Securities And Exchange Commission Or Sec Require Accreditation Status
The Securities and Exchange Commission was formed after the stock market crash of October 1929 to protect investors. In light of that, the status of being accredited is enforced to ensure that inexperienced investors don't get burned when investing in non-registered securities.
In short, the accredited investor definition was created to ensure that potentially high-risk investments were only open to people and organizations that had a risk-tolerance for them.
Is it good to be an accredited investor?
Being an accredited investor gives you a financial edge. An accredited investor is able to invest more wealth due to a stronger financial position, and can also access many other financial products that non accredited investors are not allowed to invest in.
RESOURCES
Accredited Investing What Is Acredited InvestingAccredited Investing What Is A Accredited InvestorAccredited Investing What Is A Acredited InvestorAccredited Investing What Is Accredited InvestingACCREDITED INVESTING FILES
How much money do you need to be an accredited investor?
To be considered an accredited investor, you need a net worth of $1 million or a salary of $200,000, or joint salary of $300,000 or more, for the immediate previous two years.
IMPORTANT: It is not only your salary that gets counted but also any bonuses or other tax-deductible wages reported on your year-end W-2. This is why so many tech employees are qualified as accredited investors and don’t even know it!