Accredited investor Meaning and Definition.
The term accredited investor (sometimes sophisticated investor) means a high net worth individual who is given a special status under financial regulation laws.. The exact net worth needed to be labeled an accredited investor vary from one country to the other. Also the term changes slightly but still mean the same.
Accredited investors have access to complex and higher-risk investments such as venture capital, hedge funds, and angel investments and lately STO (security approved token offering).
In the United States, the Securities and Exchange Commission (SEC) defines An accredited investor, in the context of a natural person, includes anyone who:
- earned income that exceeded $200,000 (or $300,000 together with a spouse or spousal equivalent) in each of the prior two years, and reasonably expects the same for the current year, OR
- has a net worth over $1 million, either alone or together with a spouse or spousal equivalent (excluding the value of the person’s primary residence), OR
- holds in good standing a Series 7, 65 or 82 license.
In Australia an individual meets the criteria of sophisticated investor, when has net assets of at least $2.5 million, or a gross income for each of the last two financial years of at least $250,000.
In the EU to be considered ‘elective’ professional clients, one must satisfy at least two of the following quantitative criteria in assessing the client’s expertise, experience and knowledge:
- the client has carried out trade transactions, in significant size (at least €50,000), on the relevant market at an average frequency of 10 per quarter over the previous four quarters;
- the size of the client’s financial instrument portfolio, defined as including cash deposits and financial instruments, exceeds €500,000;
- the client works or has worked in the financial sector for at least one year in a professional position which requires knowledge of the transactions or services envisaged.
It is estimate that in 2020 there were 13,665,475 accredited investor households in the USA. Roughly 10.6% of all American households were accredited in 2020. src