Accredited investor

An accredited investor is an individual or entity that meets specific financial criteria set by regulatory bodies, allowing them to participate in certain investment opportunities not available to the general public. In the United States, the Securities and Exchange Commission (SEC) defines and regulates accredited investor status.
== Definition and Purpose ==
Accredited investors are authorized to trade securities that are not registered with financial regulators, such as pre-IPO shares or stakes in emerging businesses. The concept was introduced to protect less financially sophisticated investors from high-risk investments while allowing affluent or financially knowledgeable individuals access to more complex investment opportunities.
== Qualifications ==
To qualify as an accredited investor, individuals or entities must meet one or more of the following criteria:
*Income threshold: Annual income exceeding $200,000 (or $300,000 jointly with a spouse) for the past two years, with a reasonable expectation of maintaining that level.
*Net worth: A net worth over $1 million, excluding the value of the primary residence.
*Professional credentials: Holding certain financial licenses or certifications.
*Insider status: Serving in specific roles within a company issuing unregistered securities.
*Entity qualifications: For organizations, having assets exceeding $5 million or meeting other specific criteria.
== Types of Accredited Investors ==
Accredited investors can be categorized into two main groups:
*Retail investors: Individual investors meeting the necessary criteria.
*Institutional investors: Including pension plans, businesses, endowment funds, mutual funds, hedge funds, sovereign wealth funds, and large money managers.
== Investment Opportunities ==
Accredited investors have access to a range of exclusive investment options, including:
*Private placements
*Hedge funds
*Venture capital funds
*Angel investments
*Real estate syndications
*Other high-risk, potentially high-reward opportunities
== Regulatory Framework ==
The concept of accredited investors originated in the United States following the 1929 stock market crash, leading to the creation of the Securities Act of 1933. The SEC periodically reviews and updates the definition of accredited investors to ensure it remains relevant to current market conditions.
=== Verification Process ===
Companies offering unregistered securities are responsible for verifying the accredited status of potential investors. This process may involve questionnaires, financial documentation, and other relevant information to assess eligibility.
=== Recent Developments ===
In 2020, the SEC expanded the definition of accredited investors to include individuals with specific professional knowledge or certifications, as well as "knowledgeable employees" of private funds. This change aims to broaden access to private investment opportunities while maintaining investor protection standards.
The amendments allow the SEC to qualify individuals as accredited investors based on defined measures of professional knowledge, experience or certifications in addition to the existing tests for income or net worth. The August 26th amendments were accompanied by an order from the commission recognizing holders in good standing of Series 7, Series 65 and Series 82 licenses as accredited investors. The amendments also expand the list of entities that may qualify as accredited investors, including by allowing any entity that meets an investments test to qualify. 
==Also See: Commodity Pool Operator; Commodity Trading Advisor==
== References ==
Category:Types of Investors
Category:Investors