Accredited Investor

An accredited investor is a person or entity permitted to invest in certain unregistered, private securities offerings under SEC Rule 501 of Regulation D. Accreditation is the regulatory gate for most Delaware Statutory Trusts, Qualified Opportunity Funds, private REITs, and other private real estate placements. For individuals, the most common ways to qualify are having earned income exceeding $200,000 (or $300,000 jointly with a spouse) in each of the two most recent years with a reasonable expectation of the same in the current year, or having a net worth over $1 million excluding the value of a primary residence, either alone or together with a spouse. In 2020 the SEC expanded the definition to include individuals holding certain professional credentials, such as the Series 7, Series 65, or Series 82 licenses, as well as knowledgeable employees of a private fund. Various entities, including banks, registered investment companies, and trusts or businesses with more than $5 million in assets, also qualify. The accredited-investor standard exists because private placements are exempt from the full disclosure and registration requirements that apply to public offerings; regulators assume accredited investors have the financial sophistication or resources to evaluate and bear the risk of these illiquid, higher-risk investments.