Accredited Investor

An accredited investor is a designation in the United States referring to individuals who meet a list of standards defined by the US’ Securities and Exchange Commission (SEC).

Other countries also have their own governing bodies define who or who is not eligible to be an accredited investor.

There is no uniform distinction or profile accepted by every jurisdiction.

Generally speaking, accredited investors can be classified as high-net worth individuals, banks, or financial institutions, each of whom have access to complex or higher risk types of investments.

In the US, these investors are granted special permission to invest in certain kinds of securities offerings, which can include stocks, bonds, or even cryptocurrency.

Who are Accredited Investors?

In particular, the US SEC defines requirements for accredited investors as individuals with annual income over $200K (individually) or $300K (with spouse) over the last 2 years and an expectation of the same this year.

Moreover, this includes individuals with net assets over $1 million, excluding the primary residence (unless more is owed on the mortgage than the residence is worth).

An institution with over $5 million in assets can also be classified as an accredited investor, such as a venture fund or a trust.

By extension, an entity made up entirely of accredited investors fits this description.

In the European Union (EU), an accredited investor must fulfill 2/3 of these obligations.

For example, a client has to have carried out a trade transaction of at least €50,000), on the relevant market at an average frequency of 10 per quarter over the previous four quarters.

Furthermore, the size of the client's financial instrument portfolio, defined as including cash deposits and financial instruments, exceeding €500,000 can also mean an investor is accredited.

Finally, a client working currently or previously in the financial sector for at least one year in a professional position can also be a prerequisite.