What’s an Accredited Investor?

Last Updated on June 24, 2015 by John Fischer

Accredited Investor” is the SEC’s term for investors meeting the necessary financial requirements to invest in private offerings.

Under the Securities Act of 1993, any company offering securities must either register said securities with the SEC or follow a process that exempts them from that requirement. These exemption processes are detailed under Rules 505 and 506 of Regulation D and limit the sale of unregistered securities to only accredited investors. The idea is that these investors have the financial status and background to appreciate the risks of securities investment. Less experienced individuals can be lured in by promising returns without understanding the risk involved, so the SEC created accreditation requirements to prevent the manipulation of inexperienced investors.

An Accredited Investor must…

…have a net worth of over $1 Million, not including their primary residence.

…have earned an individual annual salary of $200K or joint marital salary of $300K for the past 2 years with expectations to maintain that amount.

Accredited Investors can include…

…an investment or business-development company, or a bank.

…an employee benefit plan with assets exceeding $5 Million or managed by a bank or investment firm.

…a charitable organization worth over $5 Million.

…a trust valued above $5 Million managed by a sophisticated investor.

Accredited Investor

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