Accredited investors are those people or organizations who do not require the protections provided by SEC registration. A corporation that offers or sells its securities is required by the Securities Act of 1933 to register those securities with the SEC or obtain an exemption from the registration requirements. Selling securities to accredited investors in accordance with Regulation D rules 505 and 506 is one of the exemptions from the requirement to register securities.
According to the federal securities regulations, accredited investors include:
- A natural person whose personal net worth at the time of the purchase surpasses $1 million, whether alone or in partnership with their spouse.
- Natural individuals who earned more than $200,000 in each of the two most recent years, or who earned more than $300,000 jointly with a spouse in those years, and who have a realistic likelihood of earning as much in the current year, are considered accredited investors.
- Included is a broker/dealer buying for its own account as an investment and registered with the Commission under the Exchange Act. [Rule 501(a)(1)].
- A trust with assets over $5 million that wasn’t created to buy the securities being offered, but whose acquisitions are made by a knowledgeable individual.
- A corporation, partnership, or charity with assets worth more than $5 million.
- A general partner, executive officer, or director of the business selling the securities.