Definition
An accredited investor is an individual or entity meeting SEC wealth or income requirements, allowing them to invest in private placements, hedge funds, venture capital, and other investments not available to the general public. Individuals qualify with $1 million net worth (excluding primary residence) or $200,000 annual income ($300,000 with spouse). The rationale is that wealthy, sophisticated investors can handle risks of less-regulated investments. The definition has expanded to include certain professional certifications.
Example
A venture capital fund raising for early-stage startups only accepts accredited investors. An individual with $1.5M in investments qualifies and can invest in opportunities unavailable to those not meeting the threshold.
FAQ
What is Accredited Investor?
An individual or entity meeting SEC criteria for investing in certain unregistered securities.
Why is Accredited Investor important?
Accredited Investor helps investors evaluate regulatory and make more informed decisions.