I have some money that I would like to invest. I have some money invested in the stock market and I have found some other places I'd like to invest as well, but it seems that many places require that you be an accredited investor.

I've looked at FundersClub and Lending Club, but both require that you be an accredited investor (with the latter being because I live in the state of Kentucky).

I've looked up the qualifications for being an accredited investor and found the following:

The federal securities laws define the term accredited investor in Rule 501 of Regulation D as:

  1. a bank, insurance company, registered investment company, business development company, or small business investment company;
  2. an employee benefit plan, within the meaning of the Employee Retirement Income Security Act, if a bank, insurance company, or registered investment adviser makes the investment decisions, or if the plan has total assets in excess of $5 million;
  3. a charitable organization, corporation, or partnership with assets exceeding $5 million;
  4. a director, executive officer, or general partner of the company selling the securities;
  5. a business in which all the equity owners are accredited investors;
  6. a natural person who has individual net worth, or joint net worth with the person’s spouse, that exceeds $1 million at the time of the purchase, excluding the value of the primary residence of such person;
  7. a natural person with income exceeding $200,000 in each of the two most recent years or joint income with a spouse exceeding $300,000 for those years and a reasonable expectation of the same income level in the current year; or
  8. a trust with assets in excess of $5 million, not formed to acquire the securities offered, whose purchases a sophisticated person makes. Source

Though I make an all right amount of money, I do not make enough to qualify under option 7, nor do I qualify under any of the other options.

Is there any way for someone who does not qualify for any of those options to still invest?

Create a registered investment company, provide the company with funds, and invest via it?

UPDATE (10/29/2013)

The SEC has recently voted to allow non-accredited investors to invest a portion of their income into start-ups (Source). It's not finalized yet, but it is definitely something to keep an eye on:

Investors, over the course of a 12-month period, would be permitted to invest up to:

$2,000 or 5 percent of their annual income or net worth, whichever is greater, if both their annual income and net worth are less than $100,000.

10 percent of their annual income or net worth, whichever is greater, if either their annual income or net worth is equal to or more than $100,000. During the 12-month period, these investors would not be able to purchase more than $100,000 of securities through crowdfunding.

  • 3
    I'd research the "registered investment company" just to see what are the details there as it may not be as cheap as you think.
    – JB King
    Commented Jun 11, 2013 at 17:07
  • 3
    Be careful - all of these conditions point to big risks, and the requirements are there to let you know you'd better be liquid and able to absorb significant losses.
    – JAGAnalyst
    Commented Jun 13, 2013 at 17:47
  • 2
    Ever heard of a startup investor going to prison for the act of investing, without more being wrong? Me neither. The sharp pointy end of this is typically pointed at the fundraisers. Keep in mind, though, that losing all the money invested and having no way to recover any of it is a likely outcome. It warns you! This is also a way for the police/FBI/SEC to be lazy and do nothing, because either you were rich and lost a few million, big deal, or you lied and pretended to be rich and lost everything, and it is your own fault. Either way the consumption of donuts continues uninterrupted.
    – Paul
    Commented Oct 10, 2013 at 5:35
  • 1
    Interesting that #6 has an unstated loophole if your net worth is over $1M only if counting your primary residence. Also a kind of reverse loophole in #7 if you make over $200k but less than $300k but your spouse's income doesn't raise it to over $300k.
    – user12515
    Commented Sep 11, 2021 at 19:46
  • Invest in an accredited investor?
    – keshlam
    Commented Mar 8, 2023 at 22:39

1 Answer 1


Unfortunately, it is not possible for an ordinary person to become an accredited investor without a career change. Gaining any legal certification in investments typically requires sponsorship from an investment company (which you would be working for). There are reasons why these kinds of investments are not available to ordinary people directly, and you should definitely consult an RIA (registered investment adviser) before investing in something that isn't extremely standardized (traded on a major exchange).

The issue with these kinds of investments is that they are not particularly standardized (in terms of legal structure/settlement terms). Registered investment advisers and other people who manage investments professionally are (theoretically) given specific training to understand these kinds of non-standard investments and are (theoretically) qualified to analyze the legal documentation of these, make well-informed investment decisions, and make sure that their investors are not falling into any kind of pyramid scheme or unknowingly accepting unfavorable terms.

There are many many kinds of issues that can arise when investing in startups. What % of the company/ the company's profits are you entitled to? How long can the company go without paying you a dividend? Do they have to pay you a dividend at all? How liquid will your investment in the company be? Unfortunately, it is common for startups to accept investment but have legal restrictions on their investors' ability to sell their stake in the business and other non-standard contract clauses.

For example, some investment agreements have a clause that states that you can only sell your stake in the business to a person who already owns a stake in the business. This makes your investment essentially worthless - the company could run for an unlimited amount of time without paying you a dividend. If you are not able to sell your stake in the company you will not be able to earn any capital gains either. The probability of a startup eventually going public is extremely small.. so in this scenario it is likely you will end up gaining no return investment (though you can be happy to know you helped a company grow!)

Overall, the restrictions for these kinds of investments exist to protect ordinary folks from investing their savings into things that could get them burned. If you want to invest in companies on FundersClub build a relationship with an RIA and work with that person to invest your money. It is easier, less risky, and not all that more expensive :)

  • 4
    I understand and appreciate your answer. I think my frustration mainly comes from the fact that "ordinary people" who make a decent amount of money (but not $200k) are kept from investing even though it may be (as it is in my case) that they have some free money that they'd like to play around with and are fully aware that they could lose it all. I view it like I view Vegas; you go in with an amount that you are willing to lose, and if you do, that's fine because it's what you expected. And if manage to come out with more money, then it's a pleasant surprise.
    – Ryan
    Commented Jun 18, 2013 at 20:15
  • 3
    I certainly agree with you there! From a logical perspective I should think that people should be free to do what they want with their money. And isn't "free flow of capital" one of the fundamental principles of our economy? :) Commented Jul 26, 2013 at 2:27
  • 1
    I think maybe you meant "unlimited", not "exponential"?
    – user12515
    Commented Sep 11, 2021 at 19:48

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