Accredited Investor Definition (Regulation D, Rule 501)
An accredited investor is a person or entity the SEC allows to buy certain private placements. A natural person qualifies with income over $200,000 ($300,000 joint) in each of the last two years, or net worth over $1 million excluding the primary residence, or a Series 7, 65, or 82 license in good standing.
Why the status matters
Regulation D offerings, such as Rule 506(b) and 506(c) private placements, can be sold to accredited investors without full SEC registration. Because these investors are presumed able to evaluate risk and bear losses, the issuer faces fewer disclosure requirements.
Tests for natural persons
The income test is $200,000 individually or $300,000 with a spouse or spousal equivalent in each of the two most recent years, with a reasonable expectation of the same this year. The net worth test is over $1 million, excluding the value of the primary residence. Since 2020, holders of the Series 7, Series 65, or Series 82 licenses in good standing also qualify.
Entities
Many entities qualify, including banks, registered broker-dealers, insurance companies, and entities with more than $5 million in assets that were not formed to acquire the securities offered.
Frequently asked questions
What is Accredited Investor?
An accredited investor is a person or entity the SEC allows to buy certain private placements. A natural person qualifies with income over $200,000 ($300,000 joint) in each of the last two years, or net worth over $1 million excluding the primary residence, or a Series 7, 65, or 82 license in good standing.
How does Accredited Investor show up on the exam?
The primary residence is excluded from the net worth test. Questions frequently hide this by listing a home as part of net worth.
Practice this concept
Sources
- SEC Regulation D, Rule 501(a) (17 CFR 230.501)
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