An accredited investor is an individual or a business entity that is allowed to trade securities that may not be registered with financial authorities. They are entitled to this privileged access by satisfying at least one requirement regarding their income, net worth, asset size, governance status, or professional experience. In the U.S., the term accredited investor is used by the Securities and Exchange Commission (SEC) under Regulation D to refer to investors who are financially sophisticated and have a reduced need for the protection provided by regulatory disclosure filings. Accredited investors include high-net-worth individuals, banks, insurance companies, brokers, and trusts. Accredited investors are those individuals classified by the SEC as qualified to invest in complex or sophisticated types of securities.
To become accredited certain criteria must be met, such as having an average yearly income over $200,000 ($300,000 for joint income) or working in the financial industry. A person is also considered an accredited investor if they have a net worth exceeding $1 million, either individually or jointly with their spouse. Accredited investors are allowed to buy and invest in unregistered securities as long as they satisfy at least one of the requirements regarding income, net worth, asset size, governance status, or professional experience.