Accredited Investor
An accredited investor is an individual or entity that meets income, net-worth, or professional-credential thresholds under SEC Regulation D, qualifying them to invest in private offerings exempt from registration.
Definition
An accredited investor is an SEC-defined status under Regulation D of the Securities Act of 1933. The designation determines who can invest in private securities offerings that are exempt from public registration.
For individuals, one of the following tests must be met:
- Net worth over $1 million, excluding primary residence, alone or with a spouse or partner
- Income over $200,000 in each of the two most recent years (or $300,000 joint) with reasonable expectation of the same in the current year
- Hold a Series 7, 65, or 82 license in good standing
- Qualify as a knowledgeable employee of a private fund
For entities, several paths exist, including:
- More than $5 million in assets (LLCs, trusts, family offices among others)
- All equity owners are themselves accredited investors
- Registered investment advisers, banks, insurance companies, and similar regulated institutions
- “Family client” of a family office that itself qualifies
The category was expanded in 2020 to include professional-credential holders, knowledgeable employees, and family offices — broadening the pool beyond pure wealth tests.
Why the designation exists
The Securities Act generally requires that offered securities be registered with the SEC, an expensive and disclosure-heavy process. Regulation D creates exemptions that allow private issuers to sell to investors presumed sophisticated enough not to need the full registration disclosure regime. Accredited investor is the gate.
Accredited investor vs qualified purchaser
These are frequently confused. See Accredited Investor vs Qualified Purchaser for a full comparison. In short: accredited is the lower bar (Reg D, 1933 Act), qualified purchaser is the higher bar (3(c)(7), 1940 Act). Every qualified purchaser is accredited; the reverse is not true.
What accredited gets you
- Most Regulation D private placements (Rule 506(b) and 506(c))
- Early-stage venture syndicates and SPVs
- Real estate partnerships
- Many emerging-manager Fund I vehicles
- Secondaries platforms accepting accredited investors
What accredited does not get you
- Most 3(c)(7) funds — blue-chip PE, brand-name VC, established private credit. Those require qualified purchaser status.
- Certain pre-IPO share markets that limit access to QPs by policy
- Direct participation in some 3(c)(7) institutional products
Self-certification and verification
Two Reg D paths exist with different verification regimes:
- Rule 506(b) — no general solicitation allowed; accredited status can be self-certified through a questionnaire
- Rule 506(c) — general solicitation allowed; issuer must take reasonable steps to verify accredited status, typically through tax returns, brokerage statements, or third-party letters from attorneys, CPAs, or registered broker-dealers
Many private offerings avoid 506(c) specifically because the verification burden is material.
Related on QP List
- Post-Liquidity Planning — when founders move from accredited to QP status
- Qualified Purchaser — the higher-tier designation
- Accredited Investor vs Qualified Purchaser — side-by-side comparison
Nothing on this page is legal or investment advice.