Last Updated on March 15, 2023 by John Fischer
An accredited investor is an individual or entity that meets certain financial thresholds established by the Securities and Exchange Commission (SEC) in the United States, indicating their ability to evaluate and invest in complex financial products and services.
For individuals, an accredited investor is someone who meets one or more of the following criteria:
Has a net worth of at least $1 million, excluding their primary residence
Has an annual income of at least $200,000 in each of the two most recent years (or $300,000 jointly with a spouse) and with a reasonable expectation of reaching the same income level in the current year
Is a general partner, executive officer, or director of the issuer of the securities being offered
Has certain professional certifications, designations or credentials, or other demonstrable education or job experience that indicates an understanding of complex financial products and services.
For entities, accredited investors include certain types of organizations, including banks, insurance companies, registered investment companies, and other similar financial institutions.
The SEC established the accredited investor standard to protect investors from the risks associated with investing in complex financial products and services, while allowing those who have the financial resources and expertise to participate in these markets.