By Chris Rawley, Harvest Returns Founder & CEO
The term accredited has a number of different meanings. In the investment world, that term is confusing, at best.
The Securities Exchange Commission governs public and private investments and has determined that an accredited investor includes someone who meets one or both of the following criteria:
Earned income that exceeded $200,000 (or $300,000 together with a spouse) 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 (excluding the value of the person’s primary residence).
Accreditation doesn't requiring registering with the SEC, though a securities offeror may require declarations and proof of income or assets. Though the requirements for accreditation are firm, the intent is certainly not. The SEC believes private placements involve "unique risks." All investments entail risks, including highly regulated publicly-traded stocks. Many private placements are secured by real assets, back experienced companies, and are in well established industries, like real estate, and in the case of Harvest Returns, production agriculture. Tech IPOs and penny stocks, however, can be purchased with a few clicks by anyone with a discount brokerage account and an itchy trigger finger, and can even be dangerously leveraged with margin.
Does it make sense that a millionaire teenage music celebrity is accredited while a professional money manager with 20 years of experience may not be? Why should a professional athlete be considered a competent investor while someone with a PhD in finance is not? In a positive development, the current SEC chairman has criticized current accreditation rules.
Harvest Returns sponsors offer Regulation D investments that are open to both accredited, and in some cases, a limited number of non-accredited investors. We think that anyone who makes a decision to invest in the farm industry is sophisticated.