Accredited Investor
What Is An Accredited Investor?
An accredited investor is defined by the U.S. Securities and Exchange Commission (SEC) as someone who meets criteria related to income, net worth or financial sophistication. This designation allows individuals or entities to invest in private securities offerings. Generally, to qualify, one must have an annual income of over $200,000 ($300,000 with a spouse) for the last two years or a net worth exceeding $1 million, excluding the value of their primary residence.
Accredited investors may include individuals, banks, insurance companies, or trusts. Importantly, the definition extends to “knowledgeable employees” within the fund—persons with intimate knowledge of the fund they are managing, thereby exempting them from certain income or net worth requirements.
Under Regulation D of the federal securities laws, these investors are deemed to possess the financial sophistication needed to bear the economic risks of these investments.
In the financial industry, you will hear these referred to as “Reg D Offerings” when financial professionals are talking about the qualifications on an investment.
Here’s a breakdown of entities considered accredited:
| Entity | Criteria |
|---|---|
| Individual | Income > $200,000 or net worth > $1 million |
| Bank | Institutional status or total assets |
| Insurance Company | Licenses, authorizations, and scale |
| Trust | Assets of $5 million or more |
| Knowledgeable Employee | Position in company granting in-depth financial insight |
We understand accredited investors can potentially access investment opportunities not available to the general public. The assumption is that our financial literacy enables us to assess risks appropriately. Remember, always exercise due diligence and consult with professionals when needed.