Accredited investor.
In plain English
An accredited investor, under SEC Rule 501 of Regulation D, is an individual or entity that meets specific financial or professional criteria. For individuals, the most common paths are: $200,000 annual income ($300,000 jointly with a spouse) for the prior two years with reasonable expectation of continuing, OR $1 million net worth excluding the primary residence, OR holding certain financial credentials (Series 7, Series 65, Series 82 licenses). The threshold determines who can legally invest in private placements, hedge funds, venture capital, and many other unregistered offerings.
01Why it matters
The accredited investor line is the boundary between investments available to the general public (regulated, disclosure-rich, often safer) and those available only to wealthier or credentialed investors (much less regulated, sometimes higher returns, often higher fees and risks). It exists on the theory that wealthier investors can withstand losses and afford professional advice, though the criteria have been criticized as imperfect proxies for financial sophistication.
02The math, step by step
A software engineer earning $250,000 a year qualifies as accredited solely on income. A retired teacher with $1.5 million in retirement savings (excluding home equity) qualifies on net worth. A first-year associate at a law firm earning $190,000 does not qualify, though her firm might offer her access to certain investments through other exemptions.
04Receipts
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