Significance of Accredited Investor Requirements to Investors & Companies

Whether you’re looking to register yourself as an accredited investor, or you’re an issuer interested in conducting private placements, it’s important to have a firm understanding of accredited investor standards. To avoid serious issues down the road, it’s important that purchasers and issuers acquire verification of accredited investor status before initiating any transactions involving securities. In one of the biggest changes to the securities laws in decades, for many capital raises, the U.S. Securities and Exchange Commission (SEC) no longer accepts investor self-surveys and questionnaires as forms of sufficient methods of verification. Instead, an issuer is obligated to take “reasonable steps” to obtain proof of an investor’s status.

About Investor Accreditation
The term accredited investor is outlined by the SEC in Rule 501 of Regulation D. Under securities laws, companies may raise capital from investors and investors are permitted to invest in certain types of securities, but only if they’re verified as accredited. Title II of the JOBS act made it possible for companies to conduct private placements while generally soliciting or publicly advertising to avoid having to register their securities with the SEC as long as the securities are sold to accredited investors only. “Accredited investor” denotes a broad category that pertains to certain individuals, households, companies, and institutions.

Qualifying as an Accredited Investor
The SEC’s definitions for accredited investors center on income, net worth, and financial assets. For example, an individual or married couple with a joint net worth higher than $1 million (excluding the value of their primary residence) qualifies as an accredited investor. An individual that made over $200,000 ($300,000, if with a spouse) a year for the past two years with reasonable expectation of achieving the same income this year is also able to obtain accreditation validation. As long as investors satisfy one or more of the definitions held by the SEC and are validated under the necessary accredited investor requirements, they’re able to take part in the purchase of securities that are offered to accredited investors exclusively.

Verification Methods
In a Rule 506(c) offering, the responsibility of determining whether a purchaser is an accredited investor lies with the issuer. Private startups and companies looking to participate in general solicitation and advertising should take “reasonable steps” to affirm that an individual or organization meets accredited investor requirements before finalizing a transaction. Recommended SEC-approved methods of validation include meeting investor income and net worth standards, grandfathering of existing investors, and/or third-party confirmation by licensed professionals. protects both issuers and investors with its platform that provides third-party verification from licensed attorneys that validate accredited investor statuses. To learn more about their services, visit

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