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The Securities and Exchange Commission (SEC) focuses on protecting investors. As part of its mission, it limits who can invest in certain types of risky investments.

Anyone can invest in public registered investments, such as publicly traded stocks on an exchange, but other investments are reserved for people who are wealthier, have substantial financial knowledge, or both. These people are known as accredited investors.

Accredited investors have the ability to access many investments that non-accredited investors cannot, such as hedge funds or other investments not registered with the SEC. Unregistered investments are inherently riskier, but these investment opportunities can also be an excellent way to make money.

While there are benefits to becoming an accredited investor, it might not be clear what exactly accredited investors are or how to become accredited investors.

The accredited investor definition has evolved in recent years, with more folks now able to qualify. The line between a sophisticated investor and an accredited investor has started to blur, so a review might be helpful—even if you think you’re somewhat familiar with that line.

Below we dive into what an accredited investor is, the advantages of being one, how to become an accredited investor, and more.

What Is an Accredited Investor?

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An accredited investor is an investor that has satisfied at least one of several requirements (which we’ll get to momentarily) showing that they have a significant amount of financial knowledge, wealth, or both.

Accredited investors are allowed to buy securities that aren’t heavily regulated as it’s assumed they can understand the complexity of the investment and adequately assess the risk.

Interestingly, there’s no centralized method of licensing or verifying an accredited investor. You can’t show up to a meeting and flash an accredited investor badge. Instead, each company considering allowing you to invest must verify your accredited status independently.

Related: 19 Best High-Yield Investments [Safe Options Right Now]

Investing Platforms for Accredited Investors—Our Top Picks

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Individual CRE Properties
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Varied Private Market Investments
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Private Credit Market Investments
Minimum Investment: $500

How to Become an Accredited Investor

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The SEC says that, to qualify as an accredited investor, you must satisfy at least one (not all) of a handful of requirements; the criteria are explained in detail below.

I should point out that these qualifications don’t meet with everybody’s approval. Some believe the rules governing what constitutes an accredited investor are too strict, while others think they are too lenient. Also, take special note of the last qualification mentioned, as it’s a newer way to earn accredited investor status, and the addition of the term “spousal equivalent.”

1. Net Worth Test

You can be an accredited investor if you have a net worth of more than $1 million, excluding your primary residence. This benchmark can be met individually or with a spouse (or spousal equivalent).

The SEC defines a spousal equivalent as a “cohabitant occupying a relationship generally equivalent to that of a spouse.” So, if you have a domestic partnership with someone, you could use your joint net worth for you each to be an accredited investor.

The SEC only added the term “spousal equivalent” in 2020, so people who might not have qualified in the past might qualify now.

(And in case you’re wondering: Tax filings might be among the documents requested to verify that you’re an accredited investor. However, for purposes of meeting a benchmark with a spouse or spousal equivalent, single/married tax status isn’t explicitly outlined in the SEC’s rules. I searched through a number of filings to confirm this, and in the 2020 final ruling, the Cornell Securities Law Clinic actually comments that the addition of spousal equivalent “might encourage tax shifting because individuals who are taxed separately could be taxed less than a married couple due to different tax brackets between the two taxable units.”)

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2. Income Test

Another way to become an accredited investor is to pass the SEC’s income test.

To pass, you need an income exceeding $200,000 (individually) or $300,000 (with a spouse or partner) in each of the past two years, as well as a reasonable expectation of making at least the same during the current year qualifies a person to be an accredited investor.

You also need to qualify via the same criteria each year. So, if in Year One, you met the individual income minimum (but not the joint criteria), then in Year Two, you met the joint criteria (but not the individual criteria), that wouldn’t count as having two consecutive qualifying years.

Related: 23 Passive Income Apps that Give & Make You Money

3. Knowledgeable Employees

Executive officers, trustees, directors, general partners, and advisory board members for private funds, as well as employees of a private fund who have been working on the fund’s investment activities for at least a year, all qualify as accredited investors.

The accredited investor status extends to one’s spouse (or spousal equivalent) with respect to joint investments.

YATI Tip: If the only way you qualify as an accredited investor is by being a knowledgeable employee, your accredited investor status only applies to offerings by the private fund and other private funds managed by your employer. You can’t use your knowledgeable employee status to qualify as an accredited investor for other offerings outside of what your employer offers.

Related: How to Invest Money: 5 Steps to Start Investing w/Little Money

Certain Professional Certifications Designated by the Securities and Exchange Commission

The SEC states that an investment professional in good standing who holds either the general securities representative license (Series 7), private securities offering representative license (Series 82), or the investment advisor representative license (Series 65) qualifies as an accredited investor.

You don’t need to hold all three. Each of these licenses shows a person has sufficient financial knowledge to analyze the risks of unregistered investments.

Qualifying through professional certifications has only been an option in recent years, so investors who used to not qualify as an accredited investor might find that they now qualify.

Related: 8 Best Personal Capital Alternatives

Why Become an Accredited Investor?

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When you’re an accredited investor, you have the ability to buy investments that are unavailable to others. Some of the best investment opportunities for accredited investors include:

Private Equity Funds

When you invest in a private equity fund, you provide capital in exchange for partial ownership of a privately held company. Investor returns might come in the form of capital appreciation (selling your shares for more than you bought them for),distribution payments, or both.

These investments can result in high monetary gains but can also be riskier than traditional investments. The buy-in amount is often very high and would be too much of a financial risk for most non-accredited investors.

Additionally, these funds don’t have to disclose financial statements or earnings to the Securities and Exchange Commission, so typically, information about these investments is less plentiful than you’d find with publicly traded securities.

Related: How to Invest in Private Investment Funds [Private Equity Funds]

Venture Capital Funds

Venture capital funds provide startups with money to help them grow. In this relationship, the startup usually trades equity in exchange for money, though on occasion, they’ll issue debt instead.

If the company succeeds, it might be sold or offered to the public—ideally allowing investors to sell their shares for a profit.

These investments can be lucrative, but also risky given that many startups fail.

Related: Capital Gains Tax: What Is It And How Does It Work?

Unregistered Securities

Any security without a registration statement on file with the SEC is considered an unregistered security. An unregistered security is inherently risky given that there’s little to no oversight, which also means those offering unregistered securities don’t have to provide much (or any) information about what they’re selling.

It’s illegal to sell unregistered securities to public investors. Sellers of these securities can only sell them to someone who is an accredited investor, as unregistered securities have few investor protections.

It’s easier to get scammed through unregistered securities, but that doesn’t mean they are all scams. Some legitimate companies opt not to register with the SEC because it can save them time and money.

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Private Placements

With a private placement, a company sells shares of stock or funds to a small number of people who have accredited investor status or are institutional investors. There’s no public offering involved here.

This type of investment allows investors to obtain shares of stock or bonds from publicly traded companies, but also private investments such as private stock, hedge funds, and more. Private placements can be appealing investments because they are tax efficient. They also can cut down on overhead costs because the issuers don’t have to register with the SEC or get a credit report done.

The issuers also don’t have to meet specific requirements for quarterly cash distributions and can refocus that money toward growing the company, which benefits investors.

However, private placements are illiquid, expensive investments, making them a much better fit for experienced accredited investors than non-accredited retail investors. In addition, the SEC warns that companies engaging in private placements “may be early stage and high risk. You should be able to afford the increased risk of loss with such investments, including the potential of a total loss.”

Non-accredited investors can sometimes partake in private placements if they have enough financial knowledge.

To sell unregistered securities, companies often rely on two SEC rules included under Regulation D:

  • According to SEC Rule 504, private placement issuers can sell a maximum of $10 million of their securities in a 12-month period to an unlimited number of accredited investors.
  • Meanwhile, Rule 506(b) lets companies raise an unlimited amount of money by selling securities to up to 35 non-accredited investors, as well as an unlimited number of accredited investors. However, if non-accredited investors are involved, the company must provide them with some disclosures, financial statements and be available to answer their questions.

The Financial Industry Regulatory Authority (FINRA), which regulates member brokerage firms and exchange markets, updated private placement rules in July 2021. It now requests any broker-dealer that issues or sells a private placement to submit a copy of the offering documents before the securities’ first sale or the documents’ first use, or inform FINRA that offering documents weren’t used.

Related: The 7 Best Closed-End Funds (CEFs)

Examples of Accredited Investors

High-Net Worth Individuals

Even if a person knew nothing about investing, if they had a net worth of more than $1 million (whether individually, or jointly with a spouse or spousal equivalent), they’d qualify as a high-net-worth individual and thus be an accredited investor.

High-Income Individuals

A single person who has made over $200,000 each year over the past two years and has every reason to expect they will make the same the current year would qualify as an accredited investor.

Also, a person and their spouse or spousal equivalent who have made more than $300,000 together each of the past two years and expect to make the same the current year would meet accredited investor requirements.


Banks deal with substantial amounts of money and are considered accredited investors.

Insurance Companies

Insurance companies, which also deal with significant amounts of money, have accredited investor status.


Brokers have both the prerequisite financial knowledge and work with large sums of money, and are absolutely considered accredited investors.

Trusts and Family Offices

A trust is deemed accredited if the total assets are valued at more than $5 million and it wasn’t formed specifically for acquiring the securities offered. The investment decisions must be directed by a sophisticated investor, which means they have an adequate amount of financial knowledge.

Similarly, a family office can qualify as an accredited investor if it has assets under management valued over $5 million, wasn’t formed for the purpose of acquiring the securities offered, and is run by someone with experience and knowledge of business and finance.

Related: 23 Best Income-Generating Assets [Invest in Cash Flow]

3 Specific Scenarios Illustrating Accredited Investors

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Let’s take a look at three simple examples:

  • Example 1: Kyle has been working at the same job for the last three years, and it pays $250,000 per year. It’s a secure job he will likely have for years to come. Kyle is unmarried. In this scenario, Kyle qualifies as an accredited investor because he has been earning over $200,000 a year and expects that salary to continue.
  • Example 2: Now, let’s look at Kyle’s friend Tonya, who works at the same company. Tonya has a less senior role and only makes $175,000 per year, meaning she can’t qualify as an accredited investor through income as a single person. However, Tonya recently received a $1.2 million inheritance and has no debt. Therefore, Tonya can qualify as an accredited investor because her net worth is more than $1 million.
  • Example 3: Finally, let’s consider Tonya’s brother Devon. Devon makes $100,000 per year, so he doesn’t qualify as an accredited investor through comeperson. Like his sister, he received a $1.2 million inheritance. However, while his sister has no debt, Devon does. He has $150,000 left on his mortgage, $60,000 in student loans, and $2,000 in credit card debt.
    Remember: Your net worth is the amount that your assets exceed your liabilities. Devon has more than $1 million in the bank, but his net worth is less than $1 million—and thus he fails to meet the criteria to be an accredited investor.

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How Long Does It Take to Become an Accredited Investor?

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It depends on which requirement you are aiming to meet.

If you have a net worth (individually or with a spouse or spousal equivalent) of more than $1 million, you can become an accredited investor as soon as you reach that net worth. Similarly, if you qualify through a professional certification, you can be an accredited investor as soon as you pass the certification.

Now let’s say you want to qualify as a “knowledgeable employee.” You must hold the qualifying role for at least a year.

To become a qualified investor based on income might take two years or even longer. You need to have earned over $200,000 each year during the past two calendar years and expect to make at least that much during the current year. The minimum is $300,000 each year for the last two years if combined with a spouse or spousal equivalent. Again, you must expect to earn that much or more in the current year.

A tricky part here is that it can take longer to become an accredited investor if you don’t use the same method (individual or joint) during that time.

For example, say a wife earns $210,000 one year (above the individual minimum) while her husband stays home with their child and doesn’t receive an income. The following year, the wife cuts back on hours and earns $180,000. The husband returns to work and earns $180,000 as well, meaning their joint income is $360,000 (above the joint minimum). Both expect to earn the same the following year. However, they wouldn’t fit accredited investor requirements yet as they didn’t calculate income using the same method every year.

In the first year, she was using her individual income and in the second year, they were using their joint income. Once they jointly have met the $300,000 minimum two years in a row and can expect the same the following year, then they would qualify as accredited investors.

Related: 36 Best Passive Income Ideas [Income Investments to Consider]

How Do You Prove That You Qualify to Be an Accredited Investor?

The burden of proof on who qualifies as an accredited investor generally lies with the companies selling the investments. They are required to take steps to verify that their investors qualify. Private equity funds might ask for W-2 statements to prove your annual income, tax returns, a credit report, or financial statements to ensure you qualify as an accredited investor.

Knowledgeable employees can share how long they have been with a company, and financial professionals can show their Series 7, Series 65, or Series 82 licenses.

Some issuers rely on self-certifications of accredited investor status. We’ll be clear: Investors should never misrepresent their qualifications to try to gain accredited status … but even if they do lie, that might not absolve the company of blame for selling to you. So they usually do their due diligence in ensuring you qualify.

In some states, someone without accredited investor status can invest in a private equity fund if it’s through a crowdfunding platform. The platform will be limited in how many investors they accept that aren’t accredited per fund (no more than 35), and they must provide extra paperwork to participants if they accept non-accredited people.

Fundrise is one crowdfunding platform where a non-accredited investor can buy shares in private real estate investment trusts (REITs). It’s easy to get started (it takes roughly five minutes), and you can begin investing with as little as $10.’

Related: 11 Best Non-Stock Investments [Alternatives to the Stock Market]

Can You Lose Your Accredited Investor Status?

If your net worth or earnings suddenly drop, yes, you can lose your accredited investor status. It won’t affect any investments you are currently in, but it could affect your ability to access other accredited investments going forward.

How Does Accredited Investor Status Compare to Qualified Purchaser Status?

Both qualified purchasers and accredited investors are allowed to invest in unregistered securities. But the bar is higher to become a qualified purchaser, and qualified purchasers can partake in a broader range of investment opportunities than accredited investors.

All qualified purchasers are accredited investors, but the same isn’t true in reverse.

A qualified purchaser is a person or a family business that holds an investment portfolio with a value of at least $5 million. (Like with accredited investors, the portfolio value cannot include a primary residence. Property used in the normal conduct of business also doesn’t count.)

Another way to earn qualified purchaser status is for a single person to operate on behalf of a consortium of individuals who all have qualified purchaser status and have the ability to invest $25 million or more. (Again, a primary residence and property to conduct normal business doesn’t count.)

Finally, a trust can hold qualified purchaser status if its portfolio is valued at a minimum of $5 million and it’s owned by at least two close members of a family. This family might be spouses, siblings, children of the lead investor, or spouses of the children.

As outlined above, any individual or married couple with a net worth over $1 million (excluding primary residence) can be considered an accredited investor. Compare that to the $5 million minimum to be a qualified purchaser, and it’s clear why qualified purchasers have a broader range of investment opportunities available to them.

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About the Author

Riley Adams is the Founder and CEO of Young and the Invested. He is a licensed CPA who worked at Google as a Senior Financial Analyst overseeing advertising incentive programs for the company’s largest advertising partners and agencies. Previously, he worked as a utility regulatory strategy analyst at Entergy Corporation for six years in New Orleans.

His work has appeared in major publications like Kiplinger, MarketWatch, MSN, TurboTax, Nasdaq, Yahoo! Finance, The Globe and Mail, and CNBC’s Acorns. Riley currently holds areas of expertise in investing, taxes, real estate, cryptocurrencies and personal finance where he has been cited as an authoritative source in outlets like CNBC, Time, NBC News, APM’s Marketplace, HuffPost, Business Insider, Slate, NerdWallet, Investopedia, The Balance and Fast Company.

Riley holds a Masters of Science in Applied Economics and Demography from Pennsylvania State University and a Bachelor of Arts in Economics and Bachelor of Science in Business Administration and Finance from Centenary College of Louisiana.