What Is an Accredited Investor? Definition, How It Works and Examples

The accredited investor defined in Rule 501(a) of Regulation D is a status. It is neither a license nor an exam. Regulation D is the set of SEC rules for selling securities without registering them. The SEC keeps no register of accredited investors and issues no certificate. The rule lists thirteen categories. A person or entity that fits any one of them at the time of the sale is accredited for that sale. The figures for individuals have not risen with inflation. The last broad change came on August 26, 2020, when the SEC added routes based on professional knowledge.

A spousal equivalent is defined in Rule 501(j) as a cohabitant in a relationship generally equivalent to that of a spouse. So unmarried partners can combine income or net worth on the same terms as a married couple. These tests apply to US private offerings. Other countries run their own versions, covered further down this page.

The income test looks back at past years. You need two past years over the line on one basis, either individual or joint for every year, and no reason to expect this year to fall short. The net worth test looks at a snapshot on the day of the sale. The home is where most people misjudge it, as the example below shows.

The same person might still qualify another way. Say they earned $210,000 and $230,000 in the last two years and expect a similar salary this year. Then they pass the income test, and the net worth figure no longer matters. If the home were worth less than the mortgage on it, the shortfall would count against them as a liability. Each test stands alone, so check all of them before you conclude that you do not qualify.

Selling shares to the public in the US requires registering them with the SEC. Private placements, sales of securities to selected investors, skip that step under Rule 506 of Regulation D. The accredited investor test is what justifies this shortcut. The rule assumes that people above the line can bear the risk of an investment without a prospectus, the full disclosure document of a public offering. Rule 506 comes in two forms. They differ in how closely the issuer, the company or fund selling the securities, has to check you.

Rule 506(b)

No general solicitation, meaning no public advertising. Up to 35 buyers who are not accredited but are sophisticated, meaning experienced enough to judge the deal, may join in any 90-day period. Many private-company deals take none. The issuer needs a reasonable belief that you are accredited.

Rule 506(c)

The offering may be advertised. Every buyer must be accredited, and the issuer must take reasonable steps to verify it. The usual evidence is tax forms for income, statements dated within three months for net worth, or a written confirmation from a CPA, attorney, registered adviser or broker-dealer.

On March 12, 2025, SEC staff added a further route for 506(c). It relies on a high minimum investment: the request named $200,000 for individuals and $1,000,000 for entities. The buyer must also confirm in writing that they are accredited and that the money is not borrowed from a third party for that deal. An issuer that has verified you may rely on your written confirmation for five years afterward, unless it learns otherwise. How this works for Axevil investors is set out in accredited investor verification.

Most venture rounds, private funds and single-deal vehicles are sold under Rule 506. So are most secondary sales, where current holders sell existing private-company shares. Accreditation is the entry ticket to all of them. In the pre-IPO market, that usually means buying a share of an SPV, a special purpose vehicle that holds the company’s stock. The vehicle sells its own interests under the exemption, and each buyer generally has to pass the test.

Hedge Funds and Other Private Funds for Accredited Investors

A hedge fund that relies on the private-fund exemptions generally sells only to accredited investors. Some funds go further and accept only qualified purchasers. That is a stricter test, based on investments, under the Investment Company Act. A fund manager that charges a performance fee faces a third bar: the “qualified client” standard under the Investment Advisers Act. The three are separate tests with separate thresholds. Passing one does not mean you pass the others.

Wealth Management for Accredited Investors

A registered investment adviser can confirm a client’s status in writing, which is one of the 506(c) verification methods. A family office with more than $5 million under management can itself be accredited. Advisers who place clients into private deals typically run the check once per client and refresh it as documents age. Axevil for wealth managers describes how that works across client portfolios.

Outside the United States

Other countries apply the same idea under different names, such as professional, qualified or sophisticated investor. Each has its own thresholds and evidence. Axevil works with investors qualified under US rules and under equivalent regimes, including the DIFC, FCA, MAS and CISA frameworks. Who can invest explains how your country of residence decides which rules apply.

• Counting the homeHome equity never counts toward the $1 million, however large it is. Neither does cash raised by borrowing against the home in the 60 days before the sale.
• One good yearThe income test needs two past years over the line and a reasonable expectation for the current one. A first year above $200,000 is not enough yet.
• Mixing basesYou cannot use individual income one year and joint income the next. Pick one basis for all three years.
• A lapsed licenseSeries 7, 65 and 82 qualify only while held in good standing. An exam passed years ago does not count on its own.
• Forming an entity to qualifyAn LLC or trust set up to buy a specific offering cannot rely on the $5 million entity tests. It qualifies only if every owner is accredited.
• Treating status as permanentAccreditation is tested at each sale. Documents older than three months are generally too old for verification.

Regulation D

The set of SEC rules that lets a company sell securities without registering them. Rule 501 defines the terms. Rule 506 sets the conditions most private rounds rely on.

Private placement

A sale of securities to selected investors without registering it with the SEC.

Issuer

The company or fund selling the securities. It checks that buyers are accredited.

General solicitation

Advertising an offering to the public. Allowed under Rule 506(c), barred under Rule 506(b).

Rule 506(b)

The private-placement route without advertising. The issuer needs a reasonable belief that buyers are accredited. Most deals take accredited investors only.

Rule 506(c)

The route that allows advertising, in exchange for selling only to accredited investors whose status the issuer has taken reasonable steps to verify.

Spousal equivalent

A cohabitant in a relationship generally equivalent to marriage. Partners may combine income or net worth for the tests, as spouses can.

Knowledgeable employee

An employee of a private fund who takes part in its investment activity. Accredited for investments in that fund only.

Qualified purchaser

A stricter status under the Investment Company Act, based on investments. Some private funds accept only qualified purchasers.

SPV (special purpose vehicle)

A company formed to hold one asset. In a pre-IPO deal it holds one company’s shares and sells interests in itself to accredited investors.

Every threshold was checked against the primary source on October 1, 2026. Rules change. The version in force is always the one published in the Code of Federal Regulations. For the platform side, meaning documents, the in-app check and timings, see accredited investor requirements and the SEC’s own summary.