Accredited Investors Explainer
An accredited investor is a person or entity that meets a category defined in U.S. securities rules. The status matters because some registration exemptions permit issuers to sell securities to accredited investors with fewer of the disclosure and participation limits used for the broader public.
Individuals can qualify through specified income or net-worth thresholds, certain professional licenses, or qualifying roles with a private fund. The primary residence is excluded from the net-worth calculation, and rules address joint income, spousal equivalents, knowledgeable employees, trusts, and several entity types.
The issuer must have a reasonable basis for treating purchasers as accredited under the chosen exemption. Some offerings require specified verification steps rather than relying only on a checkbox. Documentation can involve financial statements, tax records, third-party confirmations, or other permitted methods.
Accredited status is an eligibility standard, not a statement that an investment is suitable, fairly priced, or safe. Private offerings can lack liquidity, audited information, and public-market scrutiny. Investors still need to evaluate the business, terms, conflicts, fees, transfer limits, and ability to absorb a loss.
Rules define financial, professional, and entity-based categories.
The applicable test depends on the investor and offering.
Some exemptions call for reasonable verification of status.
The process may go beyond self-certification.
Private securities can be speculative and illiquid.
Status does not replace valuation work or due diligence.
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