What it is
An accredited investor is a category defined in SEC Rule 501(a) of Regulation D. It generally describes people and entities the SEC considers to have enough financial sophistication or resources to take part in certain private offerings that are not registered with the SEC.
In August 2020, the SEC amended the definition to add people who hold certain professional credentials in good standing. These are the Series 7 (General Securities Representative), Series 65 (Investment Adviser Representative) and Series 82 (Private Securities Offerings Representative) licenses. So a person holding a Series 65 license in good standing may qualify as an accredited investor on that basis alone, without meeting an income or net worth test.
The Series 65 route is one of several. Other categories include natural persons who meet the income test or the net worth test (over $1 million, excluding primary residence), directors, executive officers or general partners of the issuer, and knowledgeable employees of a private fund. Spousal equivalents may be counted together with the person for the income and net worth tests. Entities and family offices with over $5 million in investments or assets, as well as registered investment advisers and exempt reporting advisers, can also qualify. The rule has specific conditions, so the exact text matters.
How it’s traditionally been approached
Traditionally, accredited investor status was determined mainly by income and net worth. Before 2020, a person's wealth was the main route, and professional knowledge was not a basis for qualifying.
The 2020 amendments added credentials-based categories so that people with relevant training and licensing could qualify even if they did not meet the financial tests. A licensed person's status generally depends on the license being active and in good standing.
In practice, status often comes into play when someone considers a private fund offered under Rule 506(b) or Rule 506(c). Under 506(b), the issuer may not use general solicitation. Under 506(c), general solicitation is allowed, but all purchasers must be accredited and the issuer must take reasonable steps to verify that status. Verification methods vary, and a license may be confirmed through public records, but the issuer decides what steps are reasonable under the rule.
How the right fund manager may help
The right fund manager or qualified adviser may help you understand how the accredited investor definition applies to your particular situation. A conversation is generally educational: you might talk about which category you fit, what documents could be requested, and how that connects to the type of offering being discussed.
Questions you might ask include: How is my license status confirmed? Is the offering made under Rule 506(b) or 506(c), and what does that mean for how I am approached and verified? What do the offering documents say about risks, fees, and how long money may be tied up?
Being accredited only means you may be eligible to be offered certain private securities. It does not mean an investment is suitable for you. Any offering is made only by the issuer through its own offering documents, and you should review them with your own licensed legal, tax and financial advisers.
The bigger picture
Deciding whether to explore private markets can touch more than your portfolio. It can affect your sense of security, your stress level and your plans for the future. Taking time to understand your own goals, comfort with risk, and need for access to your money may help you feel more settled about whatever you decide.
Qualifying on paper is different from feeling ready. Some people find it helpful to talk with trusted family members or advisers, and to consider how their overall wellbeing is supported by their choices. If wellbeing resources are of interest, Providers.plus is one place to explore them.
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 Series 65 license in good standing may qualify you under Rule 501(a), but it does not make any investment suitable for you, and an issuer may still ask for verification.
- The Hastings Fund is an independent directory. It is not a broker-dealer, funding portal or investment adviser, does not recommend, endorse or rank investments, and nothing here is an offer or solicitation. Tax treatment, including K-1 reporting or Section 1202 (QSBS) questions, depends on individual circumstances, so consult your own licensed advisers.
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Create an investor account →Frequently asked questions
Does a Series 65 make you an accredited investor?
A Series 65 license held in good standing can qualify a person as an accredited investor under SEC Rule 501(a), following the August 2020 amendments. This is separate from the income and net worth tests. Whether you qualify depends on the license being active and the rule's conditions.
Which licenses qualify someone as an accredited investor?
The Series 7, Series 65 and Series 82 licenses, held in good standing, are the credentials named in the 2020 amendments to Rule 501(a). Other categories, such as income, net worth, or being a knowledgeable employee of the fund, are separate routes. Check the current rule text or ask your own adviser.
Do I still need to meet the income or net worth test with a Series 65?
No, the license is its own qualifying category, so you generally do not need to meet the income or net worth test as well. The income test and the net worth test (over $1 million excluding primary residence) are alternative routes. You only need to fit one category.
How is Series 65 accredited investor status verified?
It depends on the offering. Under Rule 506(b), issuers often rely on a self-certification, while under Rule 506(c) the issuer must take reasonable steps to verify that every purchaser is accredited. A license may be checked through public records, but the issuer determines what is reasonable.
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. These rules govern how an issuer may offer securities, not whether an investment is right for you.
Does being accredited mean a private fund is a good investment for me?
No, accredited status only describes eligibility to be offered certain private securities. Private fund investments are speculative and illiquid and can lose all of their value, and past performance does not guarantee future results. Review the offering documents with your own licensed legal, tax and financial 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.