An accredited investor is a person or entity meeting SEC-defined financial or professional criteria that permit participation in most private securities offerings. For individuals, the main tests are income exceeding $200,000 ($300,000 with a spouse or spousal equivalent) in each of the past two years, or net worth over $1 million excluding the primary residence.
The tests
The definition lives in Rule 501 of Regulation D, and for individuals it offers several independent paths:
- Income: over $200,000 individually — or $300,000 jointly — in each of the two most recent years, with a reasonable expectation of the same in the current year.
- Net worth: over $1 million, alone or with a spouse, excluding the primary residence (and excluding mortgage debt up to the home’s value; underwater portions count against).
- Professional credentials: holders in good standing of the Series 7, Series 65, or Series 82 licenses qualify regardless of finances — the notable 2020 expansion that decoupled accreditation from wealth for licensed professionals.
- Fund insiders: “knowledgeable employees” of a private fund are accredited for that fund’s offerings, and directors and executive officers of an issuer are accredited for its offering.
Entities qualify through their own routes: $5 million in assets (if not formed for the specific purpose of the investment), entities in which all owners are accredited, and a catch-all for entities holding $5 million in investments. The thresholds are not inflation-indexed and have anchored the definition for decades — the reason the accredited population has grown from a sliver of households to a meaningful fraction, and a perennial subject of reform debate.
Why the status matters
Accreditation is the gate for most of the private market. Offerings under Rule 506 — the workhorse of private placements — are built around accredited purchasers: 506(b) permits up to 35 sophisticated non-accredited investors but rarely uses the allowance, and 506(c), which allows public advertising, is restricted to accredited investors entirely. Hedge funds and private equity relying on the 3(c)(1) exemption require accreditation as the floor (performance fees add the separate, higher “qualified client” test), and many real estate syndications, DSTs, and private BDC predecessors are accredited-only by design.
Verification differs by offering type — a distinction advisors field constantly. In a 506(b) offering, issuers may rely on the investor’s self-certification in the subscription agreement. In a 506(c) offering, the issuer must take reasonable steps to verify status — reviewing tax documents or account statements, or obtaining a letter from the investor’s CPA, attorney, or broker-dealer — which is why 506(c) subscriptions feel more intrusive. The status itself involves no registration or card; it’s determined offering by offering.
One tier up sits the qualified purchaser ($5 million in investments), required for 3(c)(7) funds — the distinction that determines which private funds a given client can actually access.
FAQ
What makes you an accredited investor?
Meeting any one test: the income test ($200K/$300K), the net worth test ($1M excluding your home), holding a qualifying license (Series 7, 65, or 82), or fitting a status category like knowledgeable employee of the fund.
Does my house count toward accredited investor net worth?
No — the primary residence is excluded, along with its mortgage up to the home’s value. Investment properties and second homes do count.
How is accredited status verified?
In 506(b) offerings, usually by self-certification; in 506(c) offerings, the issuer must verify through documentation or a professional’s letter. Expect to provide evidence when an offering has been publicly advertised.
Is accredited investor the same as qualified purchaser?
No. Qualified purchaser is a higher bar — $5 million in investments — required for 3(c)(7) funds. Every qualified purchaser is effectively accredited; the reverse is far from true.
Related terms
Qualified Purchaser · Regulation D · Private Placement · Subscription Agreement · Suitability
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