Definition
accredited investor
Accredited
investor is a wealthy investor who meets certain
SEC requirements for net worth and income as they
relate to some restricted offerings. Accredited
investors include institutional investors, company
directors and executive officers, high net worth
individuals, and certain other entities. Some limited
partnerships and angel investor networks accept
only accredited investors.
The
federal securities laws define the term accredited
investor in Rule 501 of Regulation D as any person
who comes within any of the following categories:
1. 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;
2. 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;
3. a charitable organization, corporation, or partnership
with assets exceeding $5 million;
4. a director, executive officer, or general partner
of the company selling the securities;
5. a business in which all the equity owners are
accredited investors;
6. a bank, insurance company, registered investment
company, business development company, or small
business investment company;
7. an 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;
8. a trust with assets in excess of $5 million,
not formed to acquire the securities offered, whose
purchases a sophisticated person makes.
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Private Equity and Venture Capital Glossary
