Accredited Investor

What is the role of Accredited Investors?

As companies raise capital, the accredited investor definition heavily influences their pool of potential investors, and as investors, the definition determines their eligibility to invest in many early-stage startups. A number of federal securities laws limit participation in offerings to accredited investors or contain restrictions on nonaccredited investors’ participation.

What are the requirements to become accredited?

Accredited investors (i.e., natural persons) are determined based on their wealth, income, and other financial sophistication measurements.

Financial Criteria

  • Net worth over $1 million, excluding the primary residence (individually or with spouse or partner)
  • Income over $200,000 (individually) or $300,000 (with spouse or partner) in each of the prior two years, and reasonably expects the same for the current year

Professional Criteria

  • Investment professionals in good standing holding the general securities representative license (Series 7), the investment adviser representative license (Series 65), or the private securities offerings representative license (Series 82)
  • Directors, executive officers, or general partners (GP) of the company selling the securities (or of a GP of that company)
  • Any “family client” of a “family office” that qualifies as an accredited investor
  • For investments in a private fund, “knowledgeable employees” of the fund

How can entities become accredited?

The structure or assets of the entity may determine whether the entity qualifies as an accredited investor.

Investments

  • Entities owning investments in excess of $5 million

Assets

  • The following entities with assets in excess of $5 million:
    – Corporations
    – Partnerships
    – LLCs
    – Trusts
    – 501(c)(3) organizations
    – Employee Benefit Plans
    – “family office” and any “family client” of that office

Owners as Accredited

  • Entities where all equity owners are accredited investors.

Investment Advisors

  • Investment advisers (SEC- or state-registered or exempt reporting advisers) and SEC-registered broker-dealers

Financial Entities

  • A bank, savings and loan association, insurance company, registered investment company, business development company, or small business investment company, or rural business investment company

This resource represents the views of the staff of the Office of the Advocate for Small Business Capital Formation. It is not a rule, regulation, or statement of the Securities and Exchange Commission (“Commission”). The Commission has neither approved nor disapproved its content. This resource, like all staff statements, has no legal force or effect: it does not alter or amend applicable law, and it creates no new or additional obligations for any person.

Modified: April 28, 2022

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Accredited Investor*
**An accredited investor, in the context of a natural person, includes anyone who: a) earned income that exceeded $200,000 (or $300,000 together with a spouse) in each of the prior two years, and reasonably expects the same for the current year, OR b) has a net worth over $1 million, either alone or together with a spouse (excluding the value of the person’s primary residence). Click here for information, or details on Accredited Entities.
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