Three years after the initial JOBS Act became law, perhaps the most awaited for provision has come to fruition. The JOBS Act has several elements that affect venture capitalists as well as those seeking investors. But the most exciting stipulation is the anticipated allowance for average Americans to gain access to some of the same investment opportunities as the elite. Crowdfunding for non-accredited investors is now available.
In the past, only accredited investors (with large net worths and proven financial security) could participate in private stock and equity options. Now, thanks to Title IV of the JOBS Act, average American citizens are eligible to participate. If you are a self-directed IRA owner, these options are permissible alternative investments for your IRA.
Crowdfunding for Non-Accredited Investors
Title IV allows non-accredited investors access to these options by initiating what they call Regulation A+, wherein the SEC has deemed two tiers that dictate this category.
Tier I allows both accredited and non-accredited investors to join the crowd in funding companies seeking up to $20,000,000. Under this tier, the state pre-emption is replaced by state-related requirements and review—with the elimination of formal audits and yearly reports that will be required for companies with offerings that fall under Tier II.
Tier II allows a ceiling of up to $50,000,000 in investment offerings. Additionally, it removes the Blue Sky Law, which mandates the registration of these options in each state the securities are sold. However, Tier II companies are required to perform financial audits and meet requirements of annual reporting.
Title IV allows non-accredited investors to invest up to 10 percent of their yearly net income or worth in crowdfunding opportunities. This rule is a protective measure. Hopefully, it prevents individuals from losing it all in one potentially unfruitful investment.
Crowdfunding in a Self-Directed IRA
Options for crowdfunding for non-accredited investors are allowed in your self-directed IRA. Self-directed account owners have incredible freedom in choosing alternative investments such as these to build wealth inside their retirement accounts. However, it is imperative you perform due diligence. It’s also smart also to consult with legal and financial professionals to ensure your transactions fall within the guidelines for IRA investments as required by the IRS.
Please note the above is a simple explanation of what the JOBS Act Title IV allows for non-accredited investors. We encourage interested investors to read more in-depth information in the following articles:
To learn more about how you can use a self-directed IRA to build retirement income, please contact Advanta IRA.