In 2022, the process of how to become an accredited investor requires the passing of certain “tests.” The SEC permits prospective investors to pass just one of these tests in order to qualify for accredited investor status. These tests include income, net worth, being a knowledgeable employee of a private fund, and having particular professional certifications.
Income Test
Someone who wants to become an accredited investor must have a pre-tax yearly income in excess of $200,000 USD in the last two years. If qualifying with a spouse or spousal equivalent, the income must be in excess of $300,000 USD.
Net Worth Test
A prospective accredited investor may also qualify for the status by having a net worth of more than $1 million USD. This net worth value must not include the value of the investor’s primary residence.
The above two tests cover the financial ways of how to become an accredited investor in 2022.
Knowledge Test
An employee who is knowledgeable of private funds may qualify as an accredited investor. A knowledgeable employee can include an executive officer, general partner, trustee, director, or other individuals who serve on a private fund or an affiliate management individual.
Someone may also qualify under the knowledge test if they are a private fund employee or an affiliate management person of a private fund who has been active in the private fund’s investment activities or those of an investment company for a minimum of 12 months.
Professional Certifications
Another method of achieving accredited investor status is by obtaining certain professional credentials and certificates that are accredited by qualifying educational institutions. By possessing particular professional certifications, investors may achieve accredited status and manage investments on behalf of others. Investment advisors and registered brokers may qualify as accredited investors.
The SEC modified the accredited investor definition as indicated below to allow the following individuals to qualify for this investor status:
- Investment advisors who are registered by the state and SEC.
- Individuals who possess certain professional designations, certifications, or other credentials issued by an accredited educational institution under the definition of the SEC.
With the knowledge of how to become an accredited investor in 2022, a prospective investor can proceed forward with confidence in achieving this prized investor status.
