In gross overview, the Securities and Exchange Commission assumes an accredited investor is one that is sufficiently sophisticated to understand the risks of investing in securities and other kinds of investments.
Most countries with robust investment opportunities have rules concerning how natural individuals as well as companies, trusts, banks and other organizations fall into that classification. In the United States, Rule 501 of Regulation D (Part 230 of the Securities Act of 1933) codifies the definition. PLEASE refer to that code for a more precise and up-to-date definition.
In general, an accredited individual is a natural person (a living, breathing human) who reasonably thinks he or she:
- has an individual net worth (or joint net worth with spouse) of $1,000,000 or more, or
- has assets under management of $1,000,000 or more
- excluding that person’s or family’s personal residence, and
- excluding any investments secured by that residence.
- had an annual income of $200,000 for the last two years ($300,000 with spouse), and
- has a reasonable expectation of a similar income in the current year.