What Is an Accredited Investor?
An accredited investor is any person or entity with enough experience to invest in unregistered securities.
In the United States, the Securities and Exchange Commission (SEC) sets the standards for becoming an accredited investor.
Under SEC law, companies and private funds cannot sell securities unless they are registered with the SEC. Some securities are exempt from registration and the SEC let’s companies sell these unregistered securities only to accredited investors.
How to Qualify
According to the SEC, an Accredited Investor is anyone who:
- Earned more than $200,000 in income in the last two years, and expects to do the same this year; or who…
- Has a net worth over $1 million, either alone or with a spouse, excluding the value of their primary residence.
For an entity to be considered an accredited investor it must be:
- Any entity with total assets of $5 million or more, directed by a sophisticated person, and not formed for the sole purpose of purchasing specific securities; or is…
- Any entity in which all of the equity owners are accredited investors.
The SEC defines a “sophisticated person” as someone with sufficient knowledge and experience to fully evaluate the investment opportunity.
For more info, please visit the SEC’s website.
Why Are Accredited Investors Important?
The SEC created accredited investors to protect people and entities from too much financial risk. The SEC considers unregistered securities more risky than investing in registered securities.
Are You an Accredited Investor?
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