If you’ve spent time in the equity crowdfunding game, you may have noticed that you need to become an accredited investor before investing in certain campaigns. Until now, that meant you had to demonstrate a net worth of at least $1M or have an annual income of at least $200,000. But thanks to new SEC regulation changes, many who previously were unable to qualify may now have an opportunity. Here’s the scoop:
Why do I need to become an accredited investor?
The accredited investor designation was created by the SEC to prevent manipulative marketing practices from leading inexperienced investors into making risky investment decisions. In the equity crowdfunding world, any campaign designated as Regulation D may be participated in only by formally accredited investors.
What’s the difference between a Regulation D campaign & other equity crowdfunding asks?
When you see a Regulation D campaign on an equity crowdfunding platform like Wefunder or StartEngine, it sometimes means that the company has already met the maximum allowance for fundraising from non-accredited investors (or they are only allowing accredited investors to invest). At this point, they can still continue to raise funds — but must do so via accredited investors.
What does the new SEC ruling mean?
The SEC recently changed the definition of an accredited investor to factor in experience. While you can still become an accredited investor by demonstrating sufficient assets/income, you may now also gain accreditation via professional knowledge and relevant credentials. For example, a successfully completed Series 7 exam could qualify you. See here for the complete press release.
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