Accredited investors: who qualifies, and why it matters

An accredited investor is a person or entity that meets income, net-worth, or professional-credential thresholds set by the U.S. Securities and Exchange Commission. The category is meant to identify investors presumed able to bear the risk of private, unregistered offerings.

Common ways to qualify

• Individual income over $200,000 (or $300,000 jointly) in each of the past two years, with the same reasonably expected this year.
• Net worth over $1,000,000, alone or jointly, excluding the value of your primary residence.
• Holding certain professional licenses in good standing — Series 7, 65, or 82.
• Entities with over $5,000,000 in assets, or in which all equity owners are themselves accredited.

These are summaries. The controlling definition is the SEC’s, and it changes from time to time; the note offering documents govern eligibility.

Why this offering is limited to accredited investors

The notes are sold under a private-placement exemption, so they are not registered with the SEC and do not carry the disclosure protections of a registered public offering. Limiting sales to accredited investors is a condition of that exemption — and a fixed-coupon note funded by options trading carries risks that make it suitable only for investors who can absorb a total loss.

How verification works under Rule 506(c)

Rule 506(c) permits an issuer to advertise a private offering publicly, but in exchange it must take reasonable steps to verify that every investor is accredited. Self-certification — simply checking a box — is not sufficient.

• Documentation such as W-2s, tax returns, or brokerage and bank statements.
• A written confirmation from your CPA, attorney, registered investment adviser, or broker-dealer.
• Third-party verification through a recognized accredited-investor verification service.