Accredited Investor Requirements for Individuals and Entities

Have you heard the term accredited investor before? What is an accredited investor exactly and what is the purpose of one of these investors? What are the accredited investor requirements they need to meet?

Learning about investing and the basics of securities such as bonds, stocks, and mutual funds is important. However, do you understand why an investor may need accredited investor status?

Here are some things you need to know regardless of whether you desire to be an accredited investor or you need an accredited investor for an investment opportunity you have available.

Definition of Accredited Investor

First of all, what is an accredited investor? Simply put, this type of investor, whether an individual or entity, meets particular investor requirements for purchasing securities not generally offered to the general public. The Securities Exchange Commission (SEC) stipulates that a company offering or selling its securities is required to either register the securities with the SEC or find an exemption from the requirements to register. Offering securities to an accredited investor, whether it is a person or institution, is one of these exemptions.

Accredited Investor Qualifications

Rule 501 of Regulation D establishes the SEC’s definition of accredited investor. The main points of the definition, which may otherwise be referred to as accredited investor qualifications in Rule 501 are as follows:

An accredited investor can be a trust, employer-sponsored retirement plan, brokerage, bank, or registered investment advisor (RIA).

To qualify as an accredited investor as an individual, the person must have a yearly income of $200,000 or greater, or $300,000 or greater with the spouse – in both cases the income must have exceeded the threshold in the past two years and will likely remain above that amount in the current year. An individual can also qualify under net worth criteria of $1 million – either individually or jointly with a spouse.

You may also meet accredited investor requirements if you are a director, executive officer, or general partner or the issuer of the securities being sold.

As is obvious, there are various ways to qualify as an accredited investor. With knowledge of the above-mentioned methods, you may have a clear view of the most efficient way to meet the accredited investor requirements.

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