What is an accredited investor?

An accredited investor should have a net worth exceeding $1 million, either individually or jointly with a spouse. This amount cannot include a primary residence. The SEC also considers applicants to be accredited investors if they are general partners, executive officers, or directors of a company that is issuing unregistered securities.

How does the SEC define an accredited investor?

Simply put, the SEC defines an accredited investor through the confines of income and net worth in two ways: 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.

How do you know if a person is an accredited investor?

No government agency or independent body reviews an investor's credentials, and no certification exam or piece of paper exists that states a person has become an accredited investor. Instead, the companies that issue unregistered securities determine a potential investor’s status by conducting diligence prior to sale.