What is Accredited Investor?

B is correct. Jennifer qualifies as an accredited investor based on the income test alone. She has earned over $200,000 annually ($210,000) for the past two years with a reasonable expectation of the same income level in the current year, which satisfies the individual income threshold.

A is incorrect because while her net worth calculation is accurate ($200,000 in assets excluding primary residence), she doesn't need to meet the net worth test since she already meets the income test. C is incorrect because primary residence equity ($200,000) must be excluded from the net worth calculation for accredited investor purposes. D is incorrect because accredited investor status requires meeting either the income threshold or the net worth threshold, not both.

B is correct. An individual qualifies as an accredited investor with income exceeding $200,000 in each of the past two years, with a reasonable expectation of reaching the same income level in the current year.

A ($100,000) is too low and not a regulatory threshold for accredited investor status. C ($250,000) is not a standard threshold, though it falls between the individual ($200,000) and joint ($300,000) thresholds. D ($300,000) is the threshold for joint income with a spouse, not individual income.

A is correct. For accredited investor purposes, the primary residence must be excluded from the net worth calculation. Calculate: $600,000 (investments) + $100,000 (vacation property) = $700,000. The primary residence value ($1.2M) and its mortgage ($400K) are both excluded.

B ($1,100,000) incorrectly adds the $400,000 mortgage balance to the $700,000 of qualifying assets; the mortgage is excluded along with the home, and a debt never adds to net worth. C ($1,500,000) incorrectly includes the primary residence equity ($800,000) in addition to other assets. D ($1,900,000) incorrectly includes the full primary residence value without subtracting the mortgage. Note that while the couple has $700,000 in qualifying net worth, they do not meet the $1 million threshold based on net worth alone (though they might qualify through income).

D is correct (the exception). This individual does not qualify as an accredited investor. They fail both tests: income is below $200,000 ($150,000 < $200,000) and net worth is below $1 million ($950,000 < $1,000,000). They must meet at least one threshold.

A qualifies based on the net worth test ($1,200,000 exceeds $1 million), even though income is below the individual threshold. B qualifies based on the joint income test ($320,000 exceeds $300,000). C qualifies based on holding a Series 65 license, which has been an alternative qualification route since December 2020, even though their net worth is below $1 million. The professional credential (Series 7, 65, or 82) provides an independent path to accredited investor status.

A is correct. Only statement 3 is accurate: the client qualifies as an accredited investor based on holding a Series 7 license, which is a recognized professional credential.

Statement 1 is false: The client's income of $190,000 is below the $200,000 individual threshold. Statement 2 is false: To calculate net worth for accredited investor purposes, exclude the primary residence entirely. Of the $1.1 million in total assets, $800,000 is the home, so the client's other assets are $300,000. The home and its $400,000 mortgage are both excluded, which leaves net worth of $300,000 for this test, below the $1 million threshold. Statement 4 is false: the client already qualifies through the Series 7 license, so no income increase is needed. The statement also misstates the income test, which requires income above $200,000 in each of the two most recent years, not a single $10,000 raise to $200,000.