Mark the date of May 25, 2015. That’s the day that the non-accredited investor can finally have access to the same money growing tools that the wealthy class have had all along. It is happening because the SEC has approved Reg. A+ rules that will allow non-accredited investors to participate while raising the fundraising cap from $5 million to $50 million.
There’s just one problem: crowdfunding platforms don’t have to automatically change their membership rules to accommodate non-accredited investors just because the rules have changed. Some may even blatantly ignore the non-accredited investor because there may not be enough value right now to complete the change.
It’s Because of the Investment Limits
Non-accredited investors are going to be strictly limited to the amount of money they’ll be allowed to put into investment crowdfunding. The current cap in the new Reg. A+ rules is 10% of a household’s annual income OR net worth. For a household earning $50k per year with minimal savings, the investment limit will be $5,000.
That’s less than what the same household could invest into a tax-advantaged retirement plan. A married couple with a combined $50k income could save $11k in an IRA, but would only be allowed $5k for investment crowdfunding.
Any gains are good gains. Many non-accredited investors are going to be surprised by the amount of due diligence and financial disclosures that will be headed their way when they choose to invest. Learning how to understand a financial background is going to take some time.
The Situation Is Still Quite Complex
Although the situation is still a bit problematic in some ways, there’s no denying the fact that May 25, 2015 signals a new era for the American investment system. There will be several challenges that must be addresses, but there are many rewards that could come out of this situation as well. Regular people will have the same chances to grow their income as everyone else and that could really strengthen many industries.
The question is this: will there be a tweak to make a net worth part of the mandatory investment requirement BEFORE annual income? If so, many families are worth a net negative amount today and would still be banned from investing. Once the rules get implemented and the air cleared, we’ll have a better idea of how this will all work. Until then, there is no denying the hope and excitement that the Reg. A+ rules have brought.