An accredited investor is a type of investor defined by the U.S. Securities and Exchange Commission (SEC) who is considered financially sophisticated and able to take on higher-risk, less-regulated investments that most individual investors aren’t eligible for. These can include private placements, hedge funds, private equity, and other restricted offerings.
Key Qualifications
To be considered accredited, an investor must meet at least one qualifying criterion:
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Income: Earned over $200,000 annually ($300,000 with a partner) for the past two years with a reasonable expectation of the same this year.
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Net Worth: Personal or joint net worth of more than $1 million, excluding the primary residence. (Entities often need higher thresholds, such as $5 million.)
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Professional Status: Holding certain financial licenses (e.g., Series 7, 65, or 62) that indicate investment expertise.
It is important to note the issuer of an investment decides how to verify someone’s accredited status and that these thresholds are common examples, while the SEC has a broader, official list of criteria.
Why It Matters & Investor Protection
Accredited status lets investors access private and often riskier investment opportunities that can skip full SEC registration and public disclosures. These rules exist to protect less experienced or less financially capable investors from potentially unsuitable or risky investments.
Examples & Special Cases Covered
The article also explains how certain investments, like Delaware Statutory Trusts (DSTs), may require accreditation due to high minimum investments, long holding periods, or regulatory restrictions, and how non-accredited investors might still participate in some offerings under specific conditions.