What is an accredited and institutional investor? What do these terms imply when it comes to investing?
If you are an investor with experience in real estate crowdfunding platforms, you may already know the answers to these commonly asked questions.
However, if you have just entered real estate crowdfunding and are unfamiliar with the requirements necessary for becoming an accredited investor, read on.
An accredited investor refers to a firm or an individual who fulfils the minimum stipulated financial threshold. As a result, they are granted investment opportunities with fewer regulations, such as having no investment limit.
To qualify as an Accredited Investor in Singapore, one must fulfil the Securities and Futures Act (SFA), which refers to a set of regulations that has been raised by the Monetary Authority of Singapore (MAS). These guidelines include more secure regulations for retail investors, and is meant to set apart Accredited Investors and Institutional Investors.
Unlike Accredited Investors, Institutional Investors include groups such as licensed banks, finance companies and even the Singapore government and other statutory bodies.
While they are also subjected to financial thresholds similar to an Accredited Investor, Institutional Investors are meant to encompass a wider variety of institutional bodies that do not fall under the category of traditional firms.
Steps to Become an Accredited Investor
Based on MAS guidelines, to qualify as an Accredited Investor, individuals should have:
- personal net assets of more than S$ 2 million.
- net financial assets of more than s$1
- an income that is at least S$300,000 over the previous year
- corporations whose net assets are more than $10 million (based on the most recent balance)
Additionally, those who want to become Accredited Investors should be financially approved by MAS. This includes holding roles such as being the trustee of a trust.
One must also choose to opt in to become an Accredited Investor. This is a rule stipulated by MAS to ensure that investors are aware that they are being offered more complex and riskier financial investments.
While becoming an Accredited Investor can be a lucrative choice, it does come with its risks. But for the financially savvy who would like access to exclusive investments, it may just be the right choice.