Accredited Investor: Requirements & How to Qualify (2025)

KEY TAKEAWAYS

• Accredited investors can invest in private securities, hedge funds, venture capital, and other unregistered investments by meeting certain income, net worth, or professional requirements
• Individual investors qualify with a net worth over $1 million (excluding primary residence) or annual income exceeding $200,000 ($300,000 for joint income)
• Professional certifications like Series 7, 65, or 82 licenses now qualify individuals as accredited investors regardless of wealth
• The SEC expanded the definition in 2020 to include more pathways beyond just wealth requirements
• Companies issuing unregistered securities must verify investor accreditation status - there's no formal certification

What Is An Accredited Investor?

An accredited investor is a designation established by the Securities and Exchange Commission (SEC) for individuals and entities allowed to participate in investments not registered with the SEC. These are typically high-net-worth individuals and companies with the means and experience to trade private, riskier investments.

The accredited investor designation allows companies and private funds to skip the need to register certain investments as long as they sell these assets to accredited investors. This opens doors to investments in private equity, hedge funds, venture capital, private placements, and equity crowdfunding that aren't available to regular retail investors.

History and Purpose of Accredited Investor Requirements

The concept of accredited investors dates back to the 1930s. Federal lawmakers were seeking a way to protect investors while also spurring new business growth. The Securities Act of 1933 was enacted to regulate offers and sales of securities in the United States.

The specific purpose of the SEC's requirements is to ensure that investors in private securities have either enough financial sophistication to evaluate the risks and merits of an investment, or sufficient wealth to bear the economic consequences of a loss.

The threshold requirements have remained largely unchanged since 1982, though the SEC has expanded the ways to qualify. These same thresholds have been in place since 1982, and have not been adjusted for inflation, leading to significantly more households qualifying today than when the rules were first established.

Current Accredited Investor Requirements (2025)

To qualify as an accredited investor in 2025, individuals must meet at least one of the following criteria:

Income Requirements

Income over $200,000 (individually) or $300,000 (with spouse or partner) in each of the prior two years, and reasonably expects the same for the current year

Important note: The income test cannot be satisfied by showing one year of an individual's income and the next two years of joint income with a spouse. You must use the same method (individual or joint) for all three years.

Net Worth Requirements

Net worth over $1 million, either alone or together with a spouse or spousal equivalent (excluding the value of the person's primary residence)

Key considerations for calculating net worth:

• The primary residence is not counted as an asset in the net worth calculation
• In general, debt secured by the primary residence (such as a mortgage or home equity line of credit) is not counted as a liability in the net worth calculation if the estimated fair market value of the residence is greater than the amount of debt secured by it
• If the amount of debt secured by the primary residence is greater than the estimated fair market value of the residence, then the excess is included as a liability in the net worth calculation

Professional Certifications and Licenses

Investment professionals in good standing holding the general securities representative license (Series 7), the investment adviser representative license (Series 65), or the private securities offerings representative license (Series 82) automatically qualify as accredited investors.

For those that do not satisfy the traditional net worth or income accreditation requirements, the Series 65 license is now the fastest and easiest way to become accredited and participate in private investments. The Series 65 exam:

• Costs $187 in fees
• Requires roughly 60 hours of study
• Doesn't need a firm sponsor
• Consists of 130 questions over 3 hours
• Requires 94 correct answers to pass (72% passing score)

Other Qualifying Categories

Directors, executive officers, or general partners (GP) of the company selling the securities (or of a GP of that company)

For investments in a private fund, "knowledgeable employees" of the fund

The SEC also considers applicants to be accredited investors if they are general partners, executive officers, or directors of a company that is issuing unregistered securities

Qualifying Entities as Accredited Investors

Entities can also qualify as accredited investors, including:

Entities owning investments in excess of $5 million

The following entities with assets in excess of $5 million: corporations, partnerships, LLCs, trusts, 501(c)(3) organizations, employee benefit plans, "family office" and any "family client" of that office

Banks, insurance companies, registered investment companies, business development companies, or small business investment companies

Investment advisers (SEC- or state-registered or exempt reporting advisers) and SEC-registered broker-dealers

Entities where all equity owners are accredited investors

How to Verify Accredited Investor Status

There is a common misconception that a "process" exists for an individual to become an accredited investor. No government agency or independent body reviews an investor's credentials, and no certification exam or piece of paper exists that states a person has become an accredited investor.

Instead, the companies that issue unregistered securities determine a potential investor's status by conducting diligence prior to sale. Since 2013, issuers must take specific verification steps:

Simply telling a firm or checking a box that signals a person is qualified is no longer allowed. Individuals who feel they qualify can visit a fund and ask for information about potential investments. At this time, the issuer of securities will give a questionnaire to determine whether a person qualifies as an "accredited investor."

The questionnaire will also likely require the attachment of financial statements and information of other accounts in order to verify the ownership of assets listed on a balance sheet. Companies will also likely evaluate a credit report in order to assess any debts held by a person seeking accredited status.

Benefits and Risks of Being an Accredited Investor

Benefits

When you become an accredited investor, you gain access to additional types of investments, such as hedge funds, private equity, private placements, venture capital, real estate crowdfunding, limited partnerships, and others

With access to a wider variety of investments, accredited investors can choose to diversify their portfolios by investing in alternative assets and unregistered securities that aren't available to the average investor

Accredited investors have privileged access to pre-IPO companies, venture capital companies, hedge funds, angel investments, and various deals involving complex and higher-risk investments and instruments

Risks

Pros of being an accredited investor include access to unique and restricted investments, high returns, and increased diversification. Cons of being an accredited investor include high risk, high minimum investment amounts, high fees, and illiquidity of the investments

Unregistered securities are inherently riskier because they lack the normal disclosure requirements that come with SEC registration

Unlike offerings registered with the SEC in which certain information is required to be disclosed, companies and private funds, such as a hedge fund or venture capital fund, engaging in these exempt offerings do not have to make prescribed disclosures to accredited investors. These offerings involve unique risks and you should be aware that you could lose your entire investment

Recent Changes to Accredited Investor Definition

The SEC has made significant changes to expand access to accredited investor status:

On Aug. 26, 2020, the U.S. Securities and Exchange Commission (SEC) amended the definition of an accredited investor. According to the SEC's press release, "the amendments allow investors to qualify as accredited investors based on defined measures of professional knowledge, experience or certifications in addition to the existing tests for income or net worth."

According to SEC chairman, Jay Clayton, "The current test for individual accredited investor status takes a binary approach to who does and does not qualify based only a person's income or net worth." Clayton expressed his opinion as follows: Modernization of this approach is long overdue. The proposal would add additional means for individuals to qualify to participate in our private capital markets based on established, clear measures of financial sophistication

The Future of Accredited Investor Requirements

There's ongoing debate about whether to adjust the financial thresholds for inflation. Section 413 of Dodd-Frank requires that the SEC undertake a review of the accredited investor definition once every four years to determine whether the requirements of the definition should be adjusted or modified for the protection of investors, in the public interest, and in light of the economy.

The staff report estimates that in 1983, one year after the exemption for public registration was created, less than 2% of U.S. households met one of the three net worth or income thresholds to qualify as accredited investors under Regulation D; in 1989, this percentage had risen to 3%; and, by the end of 2022, 18.5% of U.S. households qualified for Regulation D accreditation.

The staff report further estimated that if accredited investor thresholds are not adjusted for inflation going forward, approximately 30% of households will qualify as accredited investors by 2032.

Conclusion

The accredited investor designation provides access to exclusive investment opportunities while also serving as a regulatory safeguard. Whether qualifying through income, net worth, or professional certifications, it's essential to understand both the opportunities and risks involved in private market investments.

As regulations continue to evolve, the SEC balances protecting investors with promoting capital formation and market access. While the wealth thresholds haven't changed since 1982, the addition of professional certification pathways demonstrates a shift toward recognizing financial sophistication alongside wealth as a qualifying factor.

Before pursuing accredited investor status or investing in unregistered securities, carefully consider your financial situation, risk tolerance, and investment goals. The exclusive opportunities available to accredited investors come with unique risks that require thorough due diligence and professional guidance.