Also known as a sophisticated investor.
What Is An Accredited Investor
An accredited investor is an individual or a business entity that has special status under financial regulation laws.
The qualifications are established within each country. However, the United States markets are the largest in the world, meaning that country's standards are applied most often.
The accredited investor definition is important to companies raising capital. This defines the pool of who is eligible to participate. Many investors are not allowed to invest in early stage start ups, having to wait until the entity goes public. There are other offerings restricting the participation of non-accredited investors.
Qualifications Under U.S. Law
For an individual:
As Investor:
Net worth over $1 million, excluding 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
As A Professional:
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
For A Business
Entities owning investments in excess of $5 million
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
Entities where all equity owners are accredited investors
Investment advisers (SEC or state-registered or exempt reporting advisers) and SEC-registered broker-dealers
A bank, savings and loan association, insurance company, registered investment company, business development company, or small business investment company or rural business investment company
Unregistered securities can only be sold to accredited investors.
Accredited investors also have privileged access to venture capital, hedge funds and transactions involving complex and riskier investments and instruments.