Are You an Accredited Investor? Get Ready for Some Attention.


September 16, 2013JRW-WW.jpg


It’s nice to feel wanted. Ever see the TV show Shark Tank? On it, four wealthy “investor-sharks” hold court as a parade of aspiring entrepreneurs court their attention (and their pocketbooks) with ideas for new products and services.


If you are an accredited investor, you may soon feel like a bit of a shark yourself. On September 23, hedge funds, private businesses, equity and venture capital firms will be allowed to court you (and your pocketbook) through advertising and general solicitation, for the first time in 80 years.


The lift on this ban was approved in July 2013 as part of the Jumpstart Our Business Startups (JOBS) Act. It is intended to make it easier for companies to find investors, raise money and create jobs.


Let the marketing games begin!


There has always been a loophole in the requirement that companies selling equity register with the Securities and Exchange Commission (SEC) and submit to a host of disclosure and other requirements. The loophole was to sell equity only to wealthy “accredited” investors. But that also meant restricting your marketing efforts to networking and word-of-mouth. With that ban lifted, the marketing muzzle will be removed from a host of budding entrepreneurs and firms seeking angel investors.


What is an “accredited investor?”


To qualify as an accredited investor, an individual must earn $200,000 in each of the past two years (or $300,000 if married), or have at least $1 million in net worth, excluding a private residence.


What to expect


Are you in the medical profession? Don’t be surprised if you receive cold calls or invitations to a seminar soliciting your investment in an innovative new medical device.


Belong to an exclusive club or live in a prominent ZIP code? You will likely see more direct mail pieces in your mailbox, advertisements in your luxury and business magazines, and sponsored posts on social media.


No one knows exactly what will happen, at least in the short-term, as private companies flood the waters seeking new sources of venture capital. Hopefully, the new law will create some investment momentum as it is intended to, and have a positive impact on the U.S. economy. It may also expose you to a wider menu of investment opportunities, some of which may be a good match for your passions and investment goals.


What to watch out for


But don’t get burned. Start-ups of any kind are risky. With the absence of regulatory safeguards in the new environment, turn up the volume on your own due diligence. One idea behind the change is that accredited investors are sophisticated enough to separate wheat from chaff without the SEC’s help.


There may be truth in that, but don’t go it alone. PARTNERSINWEALTH is here to help you stay in control when the environment around you changes. We would love to meet with you and discuss the opportunities and risks that this legal change may create for your portfolio, including any specific solicitations you receive. We will help you integrate new opportunities into your larger financial picture and continue to make the kind of confident, wise decisions that made you an accredited investor in the first place. For more information, helpful guidance or professional assistance, please contact Jim Waters, CFP®, at PARTNERSINWEALTH , 713.964.4028 or