Accredited Investor Definition
An accredited investor is an individual who meets certain criteria set forth by the U.S. Securities and Exchange Commission (SEC). To be considered an accredited investor, an individual must have a net worth of at least $1 million, excluding the value of their primary residence, or have an annual income of at least $200,000 for the past two years (or $300,000 if filing jointly with a spouse).
The SEC’s definition of an accredited investor is intended to identify investors who are financially sophisticated and have a reduced risk of fraud. By meeting the requirements to be considered an accredited investor, individuals demonstrate that they have the ability to understand complex investment products and make informed investment decisions.
In addition to individuals, entities can also qualify as accredited investors. To meet the SEC’s definition of an accredited investor, entities must be registered with the SEC as investment companies, banks, insurance companies, or business development companies. Other types of entities that may qualify as accredited investors include venture capital firms, hedge funds, and private equity firms.
