Accredited Investor
An individual or entity that meets SEC wealth thresholds qualifying them to invest in unregistered securities.
What is Accredited Investor?
An accredited investor is an individual or institution that meets specific financial criteria set by the SEC, qualifying them to participate in private securities offerings not registered with the SEC. For individuals, the thresholds (as of 2023) are: annual income exceeding $200,000 (or $300,000 combined with a spouse) for the past two years, or a net worth exceeding $1 million excluding primary residence. The SEC also includes certain licensed professionals. The accredited investor framework exists because unregistered securities lack the disclosure protections of public offerings — the assumption is that wealthier investors can better assess and absorb risk.
Example
A hedge fund limiting its offering to accredited investors under SEC Rule 506(b) can raise capital from up to 35 sophisticated non-accredited investors plus unlimited accredited investors, avoiding full SEC registration.