Becoming Accredited with the Series 65 Exam: A Straightforward Guide

Apr 5, 2023

Introduction

Accredited investors are individuals who have access to exclusive investment opportunities, such as investing in startups, certain types of real estate, and hedge funds. Generally, accredited investor status is reserved for those with significant wealth. However, there is an alternative path to accreditation – passing the Series 65 exam. In this guide, we will discuss accredited investors and how the Series 65 exam can help you achieve this status without meeting the standard financial requirements.

Understanding Accredited Investors

Accredited investors are individuals or entities that meet specific financial criteria set by the Securities and Exchange Commission (SEC). These investors have access to high-risk, high-reward investments, such as investing in startups, certain types of real estate, and hedge funds. The reasoning behind this classification is that accredited investors possess the financial sophistication to handle potential losses associated with these investments. To qualify as an accredited investor, one typically needs:

  1. An annual income of $200,000 (or $300,000 combined with a spouse) for the past two years, with a reasonable expectation of the same income level in the current year.

  2. A net worth exceeding $1 million (individually or jointly with a spouse), excluding the value of their primary residence.

The Series 65 Exam Alternative

For those who do not meet the income or net worth requirements, the Series 65 exam offers an alternative route to becoming an accredited investor. This examination, designed for individuals seeking to provide investment advice or manage investments for others, allows you to qualify as an accredited investor without meeting the standard financial criteria.

Steps to Pass the Series 65 Exam and Register with the SEC

  1. Study: Prepare for the Series 65 exam, which consists of 130 multiple-choice questions covering investment products, portfolio management, ethics, and securities regulations. You have three hours to complete the test. Utilize study materials such as textbooks, online courses, and practice exams to prepare.

  2. Schedule the Exam: First, open a Financial Industry Regulatory Authority (FINRA) account and obtain a Central Registration Depository (CRD) number. Next, schedule your exam at a testing center like Prometric or Pearson VUE.

  3. Pass the Exam: To pass the Series 65 exam, you must score at least 72% (94 out of 130 questions). If you do not pass on your first attempt, you can retake the exam after waiting for a specified period.

  4. Register as an Investment Adviser: After passing the Series 65 exam, register with the SEC as an investment adviser by completing Form ADV and paying a registration fee. Once your registration is approved, you will be considered an accredited investor.

Conclusion

Passing the Series 65 exam provides an alternative path to becoming an accredited investor without meeting the standard financial requirements. Demonstrating financial knowledge and expertise allows you access to exclusive investment opportunities. However, it is essential to carefully consider the risks and consult with a trusted financial adviser before engaging in sophisticated investment options.