Glossary - Accredited Investor
An Accredited Investor is an individual or a business entity that is allowed to deal in securities that may not be registered with financial authorities by satisfying one or more requirements regarding income, net worth, asset size, governance status or professional experience. The rationale behind such a classification is to safeguard unsophisticated or non-wealthy investors from complex and higher-risk investments.
Also known as
- Qualified Investor
- Sophisticated Investor
Use cases examples
- Private Placement Memorandum: Only accredited investors, as defined by Regulation D of the Securities and Exchange Commission, are eligible to purchase shares in this private placement.
- Subscription Agreement: The undersigned certifies that they are an accredited investor pursuant to the financial criteria established in Rule 501 of Regulation D.
Considerations for investors
- Investors should be aware of their status as accredited investors to access a broader range of investment opportunities not available to the general public.
- They should also consider the additional risks associated with some investments that are typically available only to accredited investors, as these may not be subjected to the same regulatory oversight as more traditional investments.
Considerations for founders
- Understanding the criteria that define an accredited investor is crucial for founders to ensure they are offering securities in compliance with securities laws.
- Founders should consider the potential limitations on their fundraising pool when targeting only accredited investors, but also the benefits of potentially larger investments from fewer investors.
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