What does it mean to be an "accredited investor"?

Sep 14, 2022

 By TheaterMakers Studio Member, Jason Turchin

When it comes to raising money for a project, we are often asked who is allowed to invest. The law generally requires that investors are "accredited", to include those who the law assumes to have sufficient financial sophistication, wealth, and income to assume the risks of investing. But how do you become "accredited"? There's no written test or certificate you put on your wall. Rather, there are regulations put out by the Securities and Exchange Commission ("SEC") which generally control who is considered an "accredited investor".

The SEC defines "accredited investors" to include individuals who earned income that exceeded $200,000 (or $300,000 together with a spouse or partner) in each of the prior two years, and reasonably expects the same for the current year, OR has a net worth over $1 million, either alone or together with a spouse or partner (excluding the value of the person’s primary residence), OR holds in good standing a Series 7, 65 or 82 license. There are other categories to qualify, like having a trust with total assets in excess of $5 million, OR ownership in any entity in which all of the equity owners are accredited investors. There are some other exceptions and classifications of who may qualify, including limits on certain amounts to come from "non-accredited investors "so be sure to stay updated on the regulation changes.

There seems to be a disconnect at the moment on who should be allowed to invest in theater because people can invest whatever they want in meme stocks and cryptocurrency with a high risk of losing their entire investment, but can't invest in theater unless they meet a certain wealth threshold. Hopefully the minimum requirements will continue to expand to allow anyone from any background to invest in theater and own a part of a show, music recording, film or tv show. If you can buy bitcoin or GameStop stock, why can't you buy a piece of the next Tony-award winning musical?

~Jason Turchin, Producer, Investor, TheaterMaker, Attorney and founder of www.investingbroadway.com

 

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