Accredited Investor
An Accredited Investor is an individual or entity that meets certain financial criteria established by the Securities and Exchange Commission (SEC) to qualify for Investing in higher-risk, unregistered securities. The primary criteria include:
- Individuals with a net worth exceeding $1 million, excluding the value of their primary residence.
- Individuals with an annual income of over $200,000 in each of the last two years, or over $300,000 combined with a spouse.
- Entities such as banks, insurance companies, registered investment companies, business development companies, or large employee benefit plans with assets exceeding $5 million.
Examples of Accredited Investors include:
- A doctor who has a net worth of $2 million and an annual income of $250,000.
- A hedge fund that manages $50 million in assets.
- A couple whose combined income is $350,000 and who own a home worth $600,000 but have other investments that push their net worth above $1 million.
Cases where being an Accredited Investor matters:
- Investing in private placements of securities, which are not registered with the SEC and may offer higher Returns but carry more risk.
- Participating in Venture Capital funding rounds for startups seeking Equity investments.
- Engaging in certain types of Crowdfunding opportunities that are available exclusively to accredited investors.