What is an accredited investor?
Discussion About An Accredited Investor
Under the Securities Act of 1933, a company that offers or sells its securities must register the securities with the SEC or find an exemption from the registration requirements.
The Act provides companies with a number of exemptions. For some of the exemptions, such as rules 505 and 506 of Regulation D, a company may sell its securities to what are known as “accredited investors.”
The federal securities laws define the term accredited investor in Rule 501 of Regulation D as:
– bank, insurance company, registered investment company, business development company, or small business investment company
– employee benefit plan, within the meaning of the Employee Retirement Income Security Act, if a bank, insurance company, or registered investment adviser makes the investment decisions, or if the plan has total assets in excess of $5 million
– charitable organization, corporation, or partnership with assets exceeding $5 million
– director, executive officer, or general partner of the company selling the securities
– business in which all the equity owners are accredited investors; a natural person who has individual net worth, or joint net worth with the person’s spouse, that exceeds $1 million at the time of the purchase
– 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
– trust with assets in excess of $5 million, not formed to acquire the securities offered, whose purchases a sophisticated person makes