To be considered an accredited investor, one must have a net worth of at least one million US dollars, excluding the value of one’s primary residence, or have income at least $200,000 each year for the last two years (or $300,000 combined income if married) and have the expectation to make the same amount this year.
The term “accredited investor” is defined in Rule 501 of Regulation D of the U.S. Securities and Exchange Commission (SEC) as:
– a bank, insurance company, registered investment company, business development company, or small business investment company;
– 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;
– a charitable organization, corporation, or partnership with assets exceeding $5 million;
– a director, executive officer, or general partner of the company selling the securities;
– a 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, or has assets under management of $1 million or above, excluding the value of the individual’s primary residence;
– 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; or
– a trust with assets in excess of $5 million, not formed to acquire the securities offered, whose purchases a sophisticated person makes.