What it is
Under SEC Rule 501(a) of Regulation D, an "accredited investor" is a person or entity that meets certain tests. Historically, those tests were based on income or net worth. In August 2020, the SEC amended the rule to add categories based on professional knowledge and credentials.
One of those categories covers individuals who hold, in good standing, a General Securities Representative license (Series 7), an Investment Adviser Representative license (Series 65) or a Private Securities Offerings Representative license (Series 82). The rule looks at the license itself, not at how much you earn or own.
The 2020 amendments also added other categories. These include "knowledgeable employees" of a private fund, spousal equivalents who may pool finances with an accredited person, and entities or family offices with over $5 million in investments or assets. Registered investment advisers and exempt reporting advisers are also included. The income and net worth tests remain available too.
How it’s traditionally been approached
Private funds, such as venture capital funds and hedge funds, have traditionally been offered under exemptions from SEC registration. Two common ones are Rule 506(b) and Rule 506(c) of Regulation D.
Under Rule 506(b), the issuer may not use general solicitation, such as public advertising. Under Rule 506(c), general solicitation is allowed. In that case all purchasers must be accredited, and the issuer must take reasonable steps to verify that status.
Verification methods vary. With a professional license, an issuer may check public records to confirm that the credential is active and in good standing. Each issuer sets its own process, so what is asked of you can differ from one offering to the next.
How the right fund manager may help
The right independent fund manager may help you understand how private funds work, including how a strategy is structured, how fees are described and how long capital is typically committed. A good conversation is about understanding, and it carries no promise of any outcome.
In a first conversation, a manager may explain their general approach, answer questions about the fund's documents and describe what verification they would need. You can ask how they confirm license-based status, what the offering documents say about risks and what happens if you need access to your money.
Useful questions include: Who manages the fund and how are they compensated? What are the liquidity terms? How are conflicts of interest handled? What tax forms, such as a K-1, should I expect? Keep in mind that any offering is made only by the issuer through its own offering documents, and you should review those carefully with your own licensed advisers.
The bigger picture
Professional licensing can bring both confidence and pressure. You may know the industry well, yet still feel uncertain when your own money is involved. Taking time to separate what you know professionally from what you need to learn about a specific structure can support better peace of mind.
Think about how a decision fits into your wider life, including your cash needs, your comfort with uncertainty and your long-term goals. If stress about money is affecting your wellbeing, Providers.plus may help you find supportive resources. No approach is better or worse than another; what matters is what fits your circumstances.
Keep in mind
- Private fund investments are speculative and illiquid and can lose all of their value.
- Past performance does not guarantee future results.
- Holding a license may establish accredited status, but it does not mean any particular investment is suitable for you. Consult your own licensed investment, legal and tax advisers.
- Tax treatment, including how Section 1202 (QSBS) or K-1 reporting may apply, depends on individual circumstances. The Hastings Fund is not a broker-dealer, funding portal or investment adviser, and it does not recommend, endorse or rank investments. Nothing here is an offer to sell or a solicitation of an offer to buy any security.
Fund managers who often help
Get matched privatelyFrequently asked questions
Can I qualify as an accredited investor with a Series 7?
Yes, holding a Series 7 license in good standing is one way to qualify as an accredited investor under SEC Rule 501(a), following the August 2020 amendments. The rule is based on the license itself, not on your income or net worth. Whether you qualify in a particular situation is for the issuer and your own advisers to confirm.
Do Series 65 and Series 82 licenses also count?
Yes, the Series 65 and Series 82 are both named in Rule 501(a) alongside the Series 7. The license must be held and in good standing. If it has lapsed, it may not count, so confirm your status.
Does a Series 63 or Series 66 make me accredited?
No, the rule names only the Series 7, 65 and 82 licenses. Other licenses are not listed as qualifying credentials. You may still qualify through another category, such as the income or net worth tests.
How is license-based accredited status verified?
Verification depends on the offering. Under Rule 506(c), the issuer must take reasonable steps to verify that purchasers are accredited, and a license check against public records is one way an issuer may do so. Under Rule 506(b), issuers often rely on a self-certification, though practices vary.
What is the difference between Rule 506(b) and Rule 506(c)?
Rule 506(b) does not permit general solicitation, while Rule 506(c) does. Under 506(c), all purchasers must be accredited and the issuer must take reasonable steps to verify that status. Both are exemptions used for private offerings.
Are private funds risky for accredited investors?
Yes, private fund investments are speculative and illiquid and can lose all of their value. Accredited status does not reduce those risks. Past performance does not guarantee future results, so review the offering documents and speak with your own licensed advisers.
Educational resource. The Hastings Fund shares general information and connects people with independent fund managers. It is not professional advice. Talk with a qualified professional about your own situation.