What exactly is an accredited investor?
What Is an Accredited Investor?
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 requirements 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 natural high net worth individuals (HNWI), banks, insurance companies, brokers and trusts.
KEY TAKEAWAYS
Sellers of unregistered securities are only allowed to sell to accredited investors, who are deemed financially sophisticated enough to bear the risks.
Accredited investors are allowed to buy and invest in unregistered securities as long as they satisfy one (or more) requirements regarding income, net worth, asset size, governance status or professional experience.
Unregistered securities are considered inherently more risky because they lack the normal disclosures that come with SEC registration.
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