Accredited Investor
An accredited investor is an individual or entity that meets regulatory income, net worth, or professional criteria to invest in certain private offerings.
Allocator relevance: Defines legal eligibility for many private placements and funds, shaping onboarding, compliance exposure, and distribution strategy.
Expanded Definition
“Accredited investor” is a regulatory category used to limit participation in private offerings to investors presumed able to bear risk and evaluate less-disclosed investments. While criteria vary by jurisdiction, the concept generally relies on financial thresholds, professional credentials, or entity classifications.
Accredited status is not a proxy for sophistication, capital source quality, or investment skill. It is an access gate that determines who can participate, under what disclosures, and with what compliance obligations for the issuer or manager.
How It Works in Practice
During onboarding, managers collect attestations or verification documentation and store evidence as part of the subscription process. For certain offerings, verification may require additional diligence steps and periodic refresh, especially if the offering spans multiple years or jurisdictions.
Decision Authority and Governance
Compliance ownership typically sits with legal/compliance functions, but front-office teams must understand eligibility constraints to avoid improper marketing or distribution. Controls matter most when funds, SPVs, or feeder structures have differing eligibility thresholds.
Common Misconceptions
- Accredited investor is the same as qualified purchaser.
- Accreditation implies investor sophistication or “smart money.”
- Once verified, status never needs updating.
Key Takeaways
- A legal eligibility standard, not a performance signal.
- Impacts fundraising, documentation, and compliance risk.
- Verification method and recordkeeping are material for managers.