“Family clients” are family members (including spousal equivalents), former family members, and certain key employees of the family office, as well as certain of their charitable organizations, trusts, and other types of entities. A person who receives assets upon the death of a family member or key employee (i.e., a beneficiary) also qualifies as a family client for purposes of the accredited investor definition for one year.

In general, family offices are entities established by wealthy families to manage their wealth, plan for their families’ financial future, and provide other services to family members. Specifically, “family office” is defined under the Investment Advisers Act of 1940 as a company that:

• has no clients other than family clients
• is wholly owned by family clients
• is exclusively controlled by one or more family members and/or family entities; and
• does not hold itself out to the public as an investment adviser

All investments are assets but not all assets are investments. Assets are “acquired” and owned, while investments are “made” and owned. The intent of an investment is appreciation of value over time. You may own real estate as an asset, but you may also invest in that same real estate with the intent of making a financial gain from it. Typically, one makes investments after conducting meaningful financial investment analysis about the prospects of earning a return in the future, which is not necessarily done when acquiring non-financial assets.

The SEC distinguishes between certain entities owning investments vs. owning assets under some parts of the accredited investor definition. The logic is that requiring ownership of a certain amount of investments instead of assets may better demonstrate that an investor has experience in investing and is therefore more likely to have a level of financial sophistication similar to that of other institutional accredited investors.

An “investment” is an allocation of money or capital with an investment purpose and an expectation of generating a return.  For purposes of the accredited investor definition, the SEC refers to the existing definition of investments under Investment Company Act of 1940, which includes, among other things, the following items held for investment purposes:

• securities (with some exceptions)
• real estate
• commodity interests
• physical commodities
• futures, options, swaps and other financial contracts
• cash and cash equivalents (e.g., bank deposits, certificates of deposits, bankers acceptances and similar bank instruments, and net cash surrender value of an insurance policy)

“Assets” are things that have value and that an individual or an entity owns or controls with the expectation that it will provide a future benefit. Assets include real property, physical property, financial assets, and intangible items.

Real property is land and things attached to the land, like non-movable buildings. However, not all real property may be counted toward determining whether an individual qualifies as an “accredited investor” on the basis of having a net worth in excess of $1 million. The SEC requires that the value of a person’s primary residence be excluded from the net worth calculation. The term “primary residence” is commonly understood to mean the home where a person lives most of the time vs. a “secondary residence” such a person’s vacation home or an investment property. Likewise, debt secured by the primary residence (such as a mortgage or home equity line of credit) is not counted as a liability in the net worth calculation, unless the home is underwater (worth less than the mortgage or other home-equity line of credit) or the debt has increased within the past 60 days.

Physical property includes items like raw materials, inventory, office supplies, machinery, equipment, vehicles, furniture, boats and collectibles.

Financial assets are cash, stocks, bonds, certificates of deposit, mutual funds, retirement accounts, and accounts receivables.

Intangible assets are things that can’t be touched but nevertheless exist and have value, such as trade secrets, trademarks, copyrights, patents, and other intellectual property.

Yes. Joint income and assets may be included from “spousal equivalents” when calculating income and determining net worth. The SEC views a spousal equivalent as a cohabitant occupying a relationship generally equivalent to that of a spouse.

Non-U.S. investors should review the standards for their home jurisdiction. For example, the OSC web site contains the full definition of accreditation requirements that are also applicable to Canadian investors.  Canadian investors must generally also meet one of the following standards:

1. Individuals who, either alone or with a spouse, have net assets of at least $5 million CAD.
2. [in the future] Individuals with annual income over $200K CAD (individually) or $300K CAD (with spouse) in each of the last 2 years and an expectation of the same this year.
3. [in the future] Individuals who, either alone or with a spouse, beneficially own financial assets having an aggregate realizable value that before taxes, but net of any related liabilities, exceeds $1 million CAD.

Please note that not all IPOGO products are available in Canada or other non-US jurisdictions.

Other options for an entity to qualify as an Accredited Investor include:

• a bank or savings and loan,
• an insurance company,
• an investment company registered under the Investment Company Act of 1940,
• a business development company,
• a Small Business Investment Company (as defined under Section 301(c) or (d) of the Small Business Investment Act of 1958),
• a private business development company (as defined in Section 202(a)(22) of the Investment Advisers Act of 1940),
• a Rural Business Investment Company (as defined in 384A of the Consolidated Farm and Rural Development Act),
• an employee benefit plan within the meaning of Title I of the Employee Retirement Income Security Act of 1974 (ERISA), with plan assets in excess of $5 million or with a plan fiduciary, as defined in Section 3(21) of ERISA, that is a bank, savings and loan insurance company or registered investment adviser, or if a self-directed plan, with investment decisions made solely by persons who are accredited investors described in one or more categories set forth by the SEC,
• a plan, established by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, with total assets in excess of $5 million.

For more information on the SEC’s definition of an accredited investor, please click here and for SEC’s amendments to the definition, effective December 8, 2020,

For entity investors, the SEC defines an accredited investor as:

• a corporation, partnership, LLC or other entity described in Section 501(c)(3) of the IRS Code, not formed for the specific purpose of acquiring the securities offered, with total assets in excess of $5 million;
• a “family office” not formed for the purpose of acquiring the specific securities offered, with assets under management in excess of $5 million, and whose investment is directed by a person who has sufficient knowledge and experience in financial and business matters so that the family office is capable of evaluating the merits and the risks of the prospective investment;
• any entity of a type not listed in any other category set forth by the SEC, not formed for the specific purpose of acquiring the securities offered, and owning investments in excess of $5 million;
• an entity, other than a trust, in which all equity owners are accredited investors as described in one or more categories set forth by the SEC;
• a broker or dealer;
• an investment adviser registered under section 203 of the Investment Advisers Act of 1940 or registered under the laws of a US state;
• an investment adviser relying on the exemption from registration with the SEC under either sections 203(l) or 203(m) of the Investment Advisers Act of 1940;
• a trust, with total assets in excess of $5 million, not formed for the purpose of acquiring the specific securities and whose investment is directed by a person who has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of the prospective investment; or
• a revokable grantor trust, that may be amended or revoked at any time by the grantors thereof, and all of the grantors are accredited investors.

For individuals, accredited investors have historically been defined by the SEC as anyone who has:

• annual income of $200,000 or more (or $300,000 or more jointly with a spouse) in each of the last two years, and reasonably expects the same for the current year, OR
• has a net worth of $1 million or more (either alone or with a spouse), excluding the value of the person’s primary residence.

Effective December 8, 2020, “spousal equivalents” may be considered in the calculation of joint income or net worth. An accredited investor also now includes anyone who:

• holds in good standing one or more of the following professional designations or credential that the SEC has designated as qualifying an individual as an accredited investor:
  1. General Securities Representative license (Series 7);
  2. Investment Adviser Representative license (Series 65); or
  3. Private Securities Offerings license (Series 82)
• is a “family client” of a “family office” whose investment is directed by the family office, OR
• is a “knowledgeable employee” or officer or director of the issuer of the securities (or affiliated manager), where the issuer is a private fund relying on Sections 3(c)(1) or 3(c)(7) of the Investment Company Act of 1940.

IPOGO provides access to pre-IPO companies via the single company and multi-company investment offerings.  To invest in IPOGO’s offerings through an IPOGO fund, you need to be an accredited investor, as required by the SEC (Regulation D).  Simply sign up and confirm your accredited investor status.