This article was originally published on December 19, 2019 and updated January 30, 2023.

If you have been looking into alternative investment options, you may have encountered the term accredited investor. Unlike stocks, bonds, and other publicly available investment options, some investments are limited to participation by accredited investors.

Investor accreditation is a special designation in the financial world that is meant to signify a person who has the know how or alternatively the capital to absorb higher levels of risk in an investment. Importantly, accreditation is required in order to invest in GreenYield offerings.

If you already know you are accredited and would like to verify your status in order to invest in farmland with GreenYield, simply log in or create a free account.

If you need more information, this article explains what it means to be an accredited investor and why it matters. Read on to find out if you meet the qualifications, how to verify your status, and how being accredited could help you enhance your investing strategy including building a land portfolio through a platform like GreenYield.

Contents

• Why Investor Accreditation Exists
• What Is an Accredited Investor
• What Is a Non Accredited Investor
• How to Verify Accredited Investor Status

Why Does Investor Accreditation Exist

Investor accreditation is essentially a way to protect certain people from the risks of certain investments. It is standardized by the United States Securities and Exchange Commission also known as the SEC which regulates investment markets.

For public investment offerings such as stocks the SEC requires the company issuing the offering to file a registration statement. This statement provides extensive disclosures to potential investors about the company’s prospects, leadership team, finances, contracts, business plans, and more.

Private placement investment offerings such as those involving private equity, hedge funds, and venture capital may be exempt from filing a registration statement if they meet certain criteria. Because private offerings do not always provide the same level of disclosure the SEC differentiates between accredited and non accredited investors. The aim is to ensure that:

• the public is not taken advantage of
• investors in private offerings understand the risks
• investors have the financial capacity to absorb losses

What Is an Accredited Investor

The SEC qualifications come from Regulation D Rule 501 of the 1933 Securities Act. An individual must meet one of the following conditions:

• earned income exceeding 200000 dollars
• joint income with a spouse or equivalent exceeding 300000 dollars
• a net worth of at least 1 million dollars excluding the value of a primary residence
• status as an investment adviser under the Investment Advisers Act of 1940
• certain professional certifications such as Series 7 Series 65 or Series 82

Income must meet the same condition for at least two years with a reasonable expectation of similar income for the current year.

Entities may also qualify including:

• a trust or family office with at least 5 million dollars in assets not formed specifically to purchase the securities
• family clients of a qualifying family office
• entities holding at least 5 million dollars in investments or where all equity owners are accredited investors

Accredited Investor vs Sophisticated Investor

A sophisticated investor is someone with enough knowledge and experience in financial matters to evaluate risks. It is a looser term and not a replacement for accreditation.

Accredited Investor vs Qualified Purchaser

Some private funds require qualified purchaser status which is generally for individuals or family entities with at least 5 million dollars in assets excluding a primary residence.

Benefits of Being an Accredited Investor

• access to more diversified investment opportunities
• potential for higher returns
• ability to invest in special interest opportunities such as early stage companies

Drawbacks of Being an Accredited Investor

• higher risk levels
• higher investment minimums
• lower liquidity
• potential tax complexity

What Is a Non Accredited Investor

A non accredited investor is simply someone who does not meet the financial thresholds. This does not prevent them from making smart investment decisions. Some offerings allow limited participation by non accredited investors.

How to Verify Accredited Investor Status

You do not apply for accreditation. Instead you prove that you qualify. Institutions offering private placements must verify your status.

Expect to provide documentation such as:

• tax returns
• W2 forms
• investment account statements
• a letter from a CPA attorney or investment adviser

Final Thoughts

• Accreditation exists to ensure that investors participating in private offerings can handle higher levels of risk.
• Qualifications may be based on income net worth or professional certifications.
• Once you qualify it is usually simple to verify your status and begin investing in private placement offerings.

There are many opportunities for accredited investors to diversify their portfolios including private equity real estate and land. Farmland has a long history of strong performance and low volatility making it a valuable diversification tool for many accredited investors.

To verify your accreditation and start investing in farmland with GreenYield simply log in or create a free account.

Disclaimer
The content above is intended for general educational and informational purposes only. Historical performance does not guarantee future results. All investing carries risk including the possible loss of principal. Diversification does not guarantee profits or protect against losses. Review your objectives risk tolerance tax situation and liquidity needs before investing. Investment vehicles vary in fees risk factors and goals. Some investments are speculative and not suitable for all investors.

Certain links in this article may direct you to external sites that are independent of and unaffiliated with GreenYield. Information on those sites is not reviewed guaranteed or endorsed by GreenYield or its affiliates. Their terms privacy policies and legal information may differ.