SEC Loosens Accredited Investor Status

Accredited Investor - Presario Ventures

SEC Loosens Accredited Investor Status


On August 26, 2020, the SEC loosened the restrictions a little regarding the definition of an accredited investor. Why is that important to you?

In the past, many private investment firms required you to be an accredited investor to participate in their offerings. An alternative available to non-accredited investors was an offering sponsored under SEC Rule 506(b) which allowed “sophisticated” investors. This, however, required the sponsor to have a “pre-existing relationship” with the investor, and general advertising was strictly prohibited.


In 2012, the JOBS Act created Rule 506(c) which went into effect in 2014. This was created to allow advertising of private offerings, but every investor is required to be accredited and the sponsor is required to verify accredited status.

Many offerings that are seen online or through crowdfunding sites are typically 506(c) offerings because of the mass marketing, which is considered advertising. Also, some real estate sponsors are using 506(c) structures for their offerings. So, if you are an investor, the pool of investments available to you will be much larger if you are accredited.


The definition of an accredited investor has not changed, but it has been enhanced. In order to qualify, you must show an income of greater than $200,000/year as an individual or $300,000/year as a couple for the past two consecutive years.

Using the net worth requirement, you must show a net worth of over $1,000,000, exclusive of your primary residence. There are other ways to qualify, but the two above pertain to most individual investors.


The SEC has now expanded its definition, allowing individuals with certain certifications or professional experience to participate in private investments, regardless of the income or net worth requirements.

One of the most notable additions includes possession of a Series 7, Series 65, or Series 82 license. This requires knowledge of the financial markets and successfully passing the exam, but it gives some an option if they do not possess the financial requirements.

It should be noted that to take the Series 7 exam, you must first pass the Security Industry Essentials (SIE) exam. In addition, you must be sponsored by a FINRA member firm. While this is not a small undertaking, this gives a viable avenue to those who do not have the income or net worth requirements to participate in privately sponsored investments.


The amendment also now allows “knowledgeable employees” of the fund to invest as accredited investors in an offering. Thus, employees who work closely on projects and have intimate knowledge, yet they do not possess the accredited balance sheet, can invest. I know some of our employees like this provision!

There is a provision for “spousal equivalents” that now allows spousal equivalents to pool their resources for the purpose of qualifying as an accredited investor.

The remainder of the amendment discussed family offices, institutional investors, LLC’s, and foreign companies.


There are still strict income and asset-based restrictions on who can access private investments. In the past, this left some savvy and knowledgeable investors out in the cold simply because they did not have the income or the net worth to qualify. Rule 506(b) has been around for years and is still an investment avenue for sophisticated investors as long as they have a pre-existing relationship with their sponsors. This new amendment broadens the scope of accredited investors and might allow you to join that group if you are not there already.


At Presario, we are grateful to every one of you that is in the family and we sincerely wish that all of our projects will be available to you for investment. We utilize a combination of 506(c) and 506(b) offerings based on what is best for the investor and the project. We hope that this information is helpful to you so that you never have to miss out on an opportunity.

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