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get your series 65.

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I recently decided to take my Series 65 to meet the SEC's definition of an accredited investor. Why? To start angel investing in early-stage companies, mostly for fun. You can't raise a fund without a track record (well, you can if you have a lot of rich people in your network who will give you money), and it takes ~10 years to see any returns from early-stage companies.

I don't care much about TVPI (paper value); I'm here for the DVP (distributed capital). And spending my career at emerging funds means I'm going to need some help pulling together my GP commitment down the road for my own shop.

So, instead of waiting and hoping a portfolio company hits and I get permission to use it as part of my track record, I'm starting to flex that check-writing muscle and understand how my decisions and discipline change when I'm in the drivers seat. More on my angle investing here.

Passing the 65

Overall, if you've spent some time in the industry, this test isn't that hard. It's broken down into 4 sections:

  • Economic Factors & business information (~20 questions)
  • Investment Vehicles (~32)
  • Client Recommendations & Investment Strategies (~39)
  • Laws & Regs (~39)

Study to the test.

  • Test Geek: async course to get you test-ready
  • Test notes: From working through test geek
  • Do as many practice tests as you can. Lots of repeat questions.

Why it matters to be "accredited"

"For companies raising capital, the accredited investor definition largely determines who is in their pool of potential investors, and for investors whether they are eligible to invest in many early-stage companies."

Who checks? No one really, but the burden falls on the person who takes your capital to ensure you meet the definitions. So you could be putting a start-up and its founders at risk of compliance issues should something happen (I.e., bankruptcy, other investors suing, etc.), and it's uncovered that 1. they accepted money from non-accredited investors and 2. never completed the reporting and compliance requirements. More from cooley on why you really shouldn't here.

How can individuals qualify as accredited?

Check the SEC for the latest definition here.

Individuals (i.e., natural persons) may qualify as accredited investors based on wealth and income thresholds, as well as other measures of financial sophistication.

Financial Criteria

  • Net worth over $1 million, excluding primary residence (individually or with spouse or partner)
  • Income over $200,000 (individually) or $300,000 (with spouse or partner) in each of the prior two years, and reasonably expects the same for the current year

Professional Criteria

  • Investment professionals in good standing holding the general securities representative license (Series 7), the investment adviser representative license (Series 65), or the private securities offerings representative license (Series 82)
  • Directors, executive officers, or general partners (GP) of the company selling the securities (or of a GP of that company)
  • Any “family client” of a “family office” that qualifies as an accredited investor
  • For investments in a private fund, “knowledgeable employees” of the fund (aka you can ONLY invest in the fund or funds investments, not any private investment)