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  • Jeff Rodriguez

The SEC’s Definition of Accredited Investor and what it means for You

Do you watch financial news and wonder “with so much investment opportunity out there how am I limited to stocks, bonds, and mutual funds”? Even though most financial news cover investment banking, fund management, hedge funds, pensions, private equity, fintech, and stock trading.

Do you ever ask yourself, how do I get access to these investment opportunities beyond my retirement account? If most of my investments are in the public market, how do I get to participate in the private capital market? How do I get an invite to participate in these exclusive opportunities?

At first glance, it might seem like opportunities in private capital markets are like an exclusive party that only certain people get invited to attend. Most people have not heard about them because you must qualify to be told about the opportunities.

Luckily, in August of 2020, the Securities and Exchange Commission (SEC) issued an amended definition of an accredited investor, expanding the pool of people who can qualify to participate in the exclusive “party” of private capital markets.

If you have not heard of private capital markets, they are investments made in assets not traded on a public exchange or stock market, such as investments in to real estate syndications and private real estate funds.

Most real estate investment offerings are only available to accredited and sophisticated investors. Before you can get investing, you need to know which clique you’re in (sophisticated or accredited) and how to leverage your assets to gain access to the investment opportunities you deserve. In other words, you at least want a chance to be invited to the party!

So, you might be wondering - Am I an accredited investor, and do these rules help me?

The Old Definition of An Accredited Investor

According to the SEC, you must qualify as an accredited investor by meeting at least one of the monetary requirements, deeming you financially stable enough to invest in private deals like real estate investment syndications, for example.

You can qualify as an accredited investor with an individual income of over $200K per year or a joint income of over $300K per year. If you don’t meet the income requirements, the net worth requirement is + $1M in assets outside of your primary residence.

Remember, you do not have to meet both requirements. If you do, great, but only one is required.

If you don’t meet either of these requirements, don’t give up yet! It’s possible the amended definition of an accredited investor might include you, or you might fall into the non-accredited, sophisticated bucket of investors, which is also great news.

The Modernized Definition Of Accredited Investor

The August 2020 update expanded the exclusivity to extend beyond just an income or net worth requirement. Highlights of the updated definition include spousal equivalents and qualifications based on licensure, knowledge, and professional investment experience.

As of the recent amendment, the joint income requirements not only qualify legally married, traditional couples but also include “spousal equivalents,” allowing non-traditional couples to pool their income and assets to meet the income or net worth requirements from the original definition.

The update also provides that professionals with certifications, experience, or knowledge of investment securities and the risks associated, such as those licensed with a Series 7, 65, or 82, or who are knowledgeable employees of a private fund may qualify as an accredited investor. This means that even if you don’t meet the income or net worth requirements, but you’re knowledgeable of or experienced in these types of investments, that you may have a foot in the door.

The amended definition of accredited investor provides access to those who previously couldn’t qualify simply because of their lifestyle and for those who are knowledgeable and experienced with these types of investments, regardless of their income or net worth. If you are in either of these buckets, we welcome you with open arms!

How Non-Accredited Investors Can Still Participate

It’s no secret that some real estate investments are exclusive, and even though you don’t quite meet the accredited criteria, you’re a high-net-worth individual that’s determined to build wealth! So, how can you get in?

You might be what’s referred to as a sophisticated investor. The SEC provides a broad definition of a sophisticated investor as someone with sufficient capital or net worth and experience to weigh the risks and merits. Industry-wide best practices classify a sophisticated investor as someone with +$100K individual income (+$200K joint) or +$350K in assets outside the primary residence in combination with sufficient experience.

The key here is “sufficient experience,” which is why we want to have a conversation with you! We invite you to not only leverage your capital in a way that works as hard as possible toward building wealth, but to also leverage your relationships, namely, the one between you and Boost Capital Group. Even if you meet the income or net worth requirements, we can’t share deals with you (or even mention certain deals) without establishing a relationship first.

Even if the thought of talking finances on a call is something you’d rather avoid (we aren’t scary, I promise!), it’s never too early to begin a working relationship if it means you gain access to otherwise-exclusive investment opportunities. Plus, since very few deals are available to a limited number of sophisticated investors, you don’t want to miss your chance!

How The Accredited Investor Definition Affects You

The definition of an accredited investor expands the criteria to include non-traditional couples, experienced investors, and licensed investment professionals who, according to the original guidelines, would have been excluded before August of 2020. If that’s you, this is your invitation to the party! We’re excited to welcome you and those you know who are

newly-qualified (according to the amendment) high-net-worth individuals to the exclusive world of wealth-building through investments into real estate syndication and private real estate funds.

Whether you think you’re accredited, sophisticated, or unsure, the important takeaway is that we create a relationship by beginning with a call. We can then discuss your experience and investing goals. This will allow you to gain access to private capital market opportunities.

No Relationship = No Access = No Opportunity

You deserve to know about opportunities for which you qualify. It’s time to reach out and seize the chance to Join the Club and preserve and Boost your capital for a financial future peace of mind.

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