Say hello to Judy. Judy lives in downtown Pittsburgh where she works as the managing director for a software engineering firm. Judy has been comfortably pulling in a mid six-figure salary for the last four years, and with business brisk, it’s safe to say she’ll make roughly the same amount for the foreseeable future.
Judy is also a savvy investor who likes to diversify her holdings, while also giving back to her community and her city. With her solid financial background, Judy qualifies as what the Securities and Exchange Commission deems an accredited investor.
An accredited investor, initially defined under the Securities Act of 1933, is someone who meets certain financial criteria in order to invest comfortably in unregistered securities. To be considered an accredited investor, like Judy is, you must be:
- An unmarried individual with income exceeding $200,000 in each of the two most recent years and have a reasonable expectation of receiving income in excess of that amount in the current year;
- Married with joint income exceeding $300,000 in each of the two most recent years and have a reasonable expectation of receiving income in excess of that amount in the current year; or
- An individual (or, if married, jointly) with a net worth in excess of $1 million, calculated without including the value of your (or if married, you and your spouse’s) primary residence.
(Certain entities can also qualify as accredited investors. Click here for a full listing and more detailed information.)
If you meet the criteria to be an accredited investor, you are free to invest on platforms like Small Change. (And other platforms that offer what are called “Title II” offerings.) Judy, with her desire to see her money impact her city in a meaningful way, can sign up for a Small Change account ASAP and start investing in projects that make cities better.
If you’re not sure how to calculate your net worth, or want more information on how to determine if you’re an accredited investor, click here.
Wondering about Judy’s boyfriend, Jake, the aspiring musician? Jake currently makes $40,000 per year and fails to meet the accredited investor definition. Jake is a non-accredited investor. Although he can’t invest in accredited offerings, the landscape is quickly changing. Regulation A+ offerings , which allow non-accredited investors to participate, are picking up steam, individual states are increasingly adopting their own crowdfunding exemptions and the SEC recently adopted a provision of the JOBS Act called Title III, which will register platforms for non-accredited offerings. Title III will go live on May 16, 2016. While Jake will still be unable to invest in offerings set aside for only accredited investors, he will have a lot to choose from. Small Change will keep you posted. Stay tuned.
Currency collage banner image, courtesy Mark Wagner.