A qualified investor is a person or legal entity that has confirmed its qualifications and in return receives access to additional financial instruments – those that are not available to unqualified investors.
To protect novice investors from unnecessary risks, economic law divides investors into qualified and ordinary investors. Qualified include:
- National Bank;
- Credit organizations;
- Professional participants of the securities market;
- Clearing organizations;
- Joint stock investment funds;
- Insurance organizations;
- International financial organizations.
An individual can also become a qualified investor. To do this, it is necessary that professionals recognize it as such: brokers, trustees, management companies of joint-stock investment funds and mutual investment funds.
What are the benefits of being a qualified investor?
The status of a qualified investor allows you to make transactions with financial instruments that are not available to ordinary investors. For example, with securities of foreign issuers that are not admitted to public offering or circulation in the country, foreign financial instruments that are not qualified as securities, etc.
Different brokers may give qualified investors access to a different set of financial instruments. Before opening an account with a new broker, it is worth checking the list of financial instruments that he has.
Requirements for a qualified investor
To obtain the status of a qualified investor, it is enough to fulfill one of the conditions:
- experience in an organization that has dealt with securities or derivatives;
- get an economic education at a university that, at the time of graduation, could issue a certificate in the field of professional activity in the securities market;
- certificate of a financial market specialist, auditor, insurance actuary, CFA, CIIA, FRM;
The status of a qualified investor allows you to use financial instruments that are not available to ordinary investors. For example, shares of investment funds (ETFs) that are not allowed to trade on US exchanges. The status of a qualified investor can be assigned by a broker or management company. To do this, you must submit supporting documents.
There is no unified register of qualified investors. For a new broker, the status will have to be confirmed again.