ACCREDITED INVESTORS 

 




ACCREDITED INVESTORS


Under the Securities Act of 1933, a company that offers or sells its securities must register the securities with the SEC or find an exemption from the registration requirements. The Act provides companies with a number of exemptions. For some of the exemptions, such as rules 505 and 506 of Regulation D, a company may sell its securities to what are known as "accredited investors."

The federal securities laws define the term accredited investor in Rule 501 of Regulation D as:

  • A bank, insurance company, registered investment company, business development company, or small business investment company;
  • An employee benefit plan, within the meaning of the Employee Retirement Income Security Act, if a bank, insurance company, or registered investment adviser makes the investment decisions, or if the plan has total assets in excess of $5 million;
  • A charitable organization, corporation, partnership or family office with assets exceeding $5 million;
  • A director, executive officer, or general partner of the company selling the securities;
  • A business in which all the equity owners are accredited investors;
  • A natural person who has individual net worth, or joint net worth with the person’s spouse, that exceeds $1 million at the time of the purchase;
  • A natural person with income exceeding $200,000 in each of the two most recent years or joint income with a spouse exceeding $300,000 for those years and a reasonable expectation of the same income level in the current year; or
  • A trust with assets in excess of $5 million, not formed to acquire the securities offered, whose purchases a sophisticated person makes.
  • Any natural person holding in good standing one or more professional certifications or designations or credentials from an accredited educational institution that the Commission has designated as qualifying an individual for accredited investor status. 
  • An executive officer, director, trustee, general partner, or advisory board member of a private fund, or an employee who participates in investment activites as part of his or her regular functions or duties.