> Accredited investor

Accredited investor

An accredited investor is a person eligible to trade in unregistered securities. They can participate in private placements, intended for banks, corporations and other institutions, which are off-limits to retail investors.

Accredited investors qualify in one of two ways: through income or wealth.


One way to achieve this status is to make more than $200,000 as an individual, or $300,000 as a married couple. Accredited investors need to have reached this income level in both of the last two years. They also need reason to believe they will cross that threshold in the current year.


The other way is to prove a net worth of more than $1 million, alone or as a couple. The Securities and Exchange Commission excludes the value of the investor’s primary home, meaning it counts neither the equity in the property nor most mortgage liability. The regulator also states that a couple need not hold all its combined wealth jointly.

More about accredited investors

Investors need to be consistent with whether they show income as individuals or couples. They can’t switch back and forth between these standards just to ensure they qualify. The only exception is for people who actually did get married within the past three years.

To prevent people from trying to circumvent the wealth test, regulators have had to stay one step ahead. The SEC refined the wealth test to keep bad actors from counting wealth that ought to be locked up in home value as cash. For example, the portion of any mortgage exceeding the property’s fair market value counts toward liabilities. So does any loan taken out in the past 60 days that uses the primary home as collateral.

“Accredited investor” is not the same thing as “sophisticated person,” although many confuse these terms — which do overlap. A sophisticated person is someone who, through their role in the financial services industry, should have sufficient expertise to assess the risks of unregistered securities.

For more information about accreditation, visit our FAQ.