Glossary · Legal, regulatory & tax
Accredited Investor
Also called: Rule 501(a)
An accredited investor is a person or entity in a category listed in Securities and Exchange Commission (SEC) Rule 501(a) of Regulation D; individuals qualify chiefly through net worth above $1 million, excluding the primary residence, or income above $200,000.
US law lets companies and funds raise money privately, without registering the offering with the SEC, if they sell mainly to investors the law presumes can bear the risk and obtain the information they need. The accredited investor list is the main way the law identifies those investors. It is a status tested at the time of each sale, not a licence or certificate: the issuer decides whether a buyer meets it.
Formal definition
Rule 501(a) (17 CFR 230.501(a)) defines an accredited investor as any person who comes within one of the thirteen categories listed in paragraphs (a)(1)–(a)(13), or whom the issuer reasonably believes comes within one of them, at the time of the sale of the securities to that person.
Jurisdiction and status
Accredited investor is a US federal securities-law term, defined in Rule 501(a) of Regulation D (17 CFR 230.501(a)), the set of SEC rules that implements the registration exemptions of the Securities Act of 1933. The last substantive amendment was Release 33-10824, adopted on 26 August 2020 and effective on 8 December 2020; a technical amendment followed on 18 February 2025 (90 FR 9687, Release 33-11361). The dollar thresholds are not indexed for inflation.
Pending, not law (as of 2 October 2026): on 30 September 2026 the SEC requested comment on new credential pathways for natural persons: an exam developed by the Financial Industry Regulatory Authority (FINRA), the certified public accountant (CPA) licence, the Chartered Financial Analyst (CFA) charter, Certified Financial Planner (CFP) certification, and FINRA Series 79, 86 and 87. A separate notice, Release 33-11447, asks whether to designate CFA charterholders by order. As of 2 October 2026 no such designation had been made, and the current definition is unchanged.
Tests for natural persons
| Basis | Test | Provision |
|---|---|---|
| Net worth | More than $1 million, alone or with a spouse or spousal equivalent, excluding the primary residence | 501(a)(5) |
| Income | More than $200,000 (or $300,000 jointly with a spouse or spousal equivalent) in each of the two most recent years, with a reasonable expectation of the same level in the current year | 501(a)(6) |
| Professional credential | Holder in good standing of a credential designated by SEC order; currently the Series 7, Series 65 and Series 82 licences | 501(a)(10) |
| Fund insider | Knowledgeable employee of the private fund issuing the securities | 501(a)(11) |
| Issuer insider | Director, executive officer or general partner of the issuer, or of its general partner | 501(a)(4) |
| Family client | Family client of a qualifying family office, where the office directs the investment | 501(a)(13) |
For the net worth test, the primary residence is excluded as an asset and the mortgage on it is excluded as a liability up to the home's fair market value. Mortgage debt above that value counts as a liability, as does any increase in debt secured by the residence in the 60 days before the sale, unless it was incurred to acquire the residence.
Tests for entities
| Entity | Test | Provision |
|---|---|---|
| Regulated institutions: banks, registered broker-dealers, SEC- and state-registered investment advisers, exempt reporting advisers, insurance companies, registered investment companies, business development companies (BDCs), small business investment companies (SBICs), rural business investment companies (RBICs) | Status alone | 501(a)(1) |
| State and municipal plans; plans under the Employee Retirement Income Security Act (ERISA) | Total assets above $5 million, or (ERISA plans) a qualifying fiduciary or self-directed by accredited investors | 501(a)(1) |
| Corporations, partnerships, limited liability companies (LLCs), business trusts, 501(c)(3) organisations | Total assets above $5 million; not formed to acquire the securities offered | 501(a)(3) |
| Trusts | Total assets above $5 million; not formed for the purpose; purchase directed by a sophisticated person | 501(a)(7) |
| Any entity | All equity owners are accredited investors | 501(a)(8) |
| Any other entity | Owns investments (as defined in Rule 2a51-1(b)) above $5 million; not formed for the purpose | 501(a)(9) |
| Family office | Assets under management above $5 million; not formed for the purpose; investment directed by a person with financial knowledge and experience | 501(a)(12) |
The 2020 amendments added the credential, knowledgeable-employee, family-office, family-client and $5 million investments-owned categories, made LLCs, exempt reporting advisers and rural business investment companies eligible, and introduced the spousal-equivalent concept.
How the status is used in private funds
Accredited status matters because of Rule 506. Under Rule 506(b) an issuer may sell to an unlimited number of accredited investors and up to 35 non-accredited but sophisticated purchasers in any 90-day period; under Rule 506(c) every purchaser must be accredited and the issuer must verify that status through reasonable steps. Because non-accredited purchasers trigger extensive disclosure obligations, private funds typically admit only accredited investors and collect a representation in the subscription agreement.
Accredited status is often necessary but not sufficient. A 3(c)(7) fund must be owned exclusively by qualified purchasers, apart from holdings that SEC Rule 3c-5 disregards, such as those of knowledgeable employees. A registered adviser charging carried interest to a 3(c)(1) fund generally needs each investor charged that fee to be a qualified client, a higher bar than the $1 million net worth test.
Legal definition and market usage
Legally the term exists for Regulation D, and only the Rule 501(a) categories count. Rule 501(a) sets up no certificate or register: status depends on whether the purchaser comes within a category, or the issuer reasonably believes it does, at the time of each sale, and under Rule 506(c) the issuer must also take reasonable steps to verify it. In marketing and press usage, "accredited" is often used loosely to mean wealthy or sophisticated, and platforms sometimes describe their own onboarding checks as "accreditation". Neither usage changes the legal test.
Rule 501(a) defines the term for Regulation D only. Other jurisdictions classify investors under their own rules (see professional investor).
Worked example
Illustrative net worth calculation under Rule 501(a)(5)
An individual holds $2.4m of assets, including a primary residence worth $0.9m with a $0.5m mortgage, and owes $0.3m of other debt. Excluding the residence leaves $1.5m of assets. The mortgage is below the home's value, so it is also excluded; the $0.3m of other debt is deducted. Net worth for the test is $1.2m, above the $1m threshold.
Now assume that in the 60 days before the investment the individual drew an extra $0.25m against the home, other than to buy the home, and spent it. The increase counts as a liability and the spent cash is no longer an asset, so net worth for the test falls to $0.95m, below the threshold. Had the cash still been held, it would count as an asset and offset the new liability. The figures illustrate the arithmetic of the rule only; whether a particular investor qualifies is a determination for the issuer and its counsel.
Examples are illustrative; figures are not market data.
Not the same as
- Qualified Purchaser (QP): A qualified purchaser test counts investments owned ($5 million for individuals, $25 million for most entities) and governs 3(c)(7) funds; accredited status governs Regulation D sales.
- Qualified Client: Qualified client is the Advisers Act test for charging performance fees, with higher dollar amounts that the SEC adjusts for inflation; accredited status governs who may buy in a Regulation D offering.
- Qualified Institutional Buyer: A qualified institutional buyer (QIB) generally owns and invests at least $100 million in securities and is the buyer class for Rule 144A resales, not Regulation D offerings.
- Professional Investor (EU/UK): Professional investor is a classification under non-US rules with its own criteria; accredited investor is a US Regulation D definition.
Common mistakes
- Counting equity in the primary residence toward the $1 million net worth test.
- Assuming the thresholds rise with inflation. The Rule 501(a) dollar amounts are not indexed.
- Describing the September 2026 credential proposals (CPA, CFA, CFP, Series 79/86/87) as in force. They are requests for comment.
- Treating accredited status as sufficient for any private fund: a 3(c)(7) fund needs qualified purchasers, and carried interest charged by a registered adviser to a 3(c)(1) fund generally needs qualified clients.
- Believing self-certification always suffices. Rule 506(c) requires the issuer to take reasonable verification steps.
Edge cases
- Since 8 December 2020 joint net worth and joint income may be combined with a spousal equivalent, not only a spouse.
- An entity formed to make the investment cannot rely on the $5 million asset or investment tests, but can qualify under Rule 501(a)(8) if every equity owner is accredited.
- Status is tested at the time of sale. The Form D instructions treat a mandatory capital call as made under the original offering, not as a new offering, so in fund practice status is checked when a subscription or commitment is accepted rather than at each capital call, and funds generally test again for a new or increased commitment.
- A purchaser the issuer reasonably believed to be accredited at the time of sale is treated as accredited even if the belief later proves wrong.
Questions
Does a primary residence count toward the accredited investor net worth test?
No. The residence is excluded as an asset, and the mortgage on it is excluded as a liability up to the home's fair market value. Mortgage debt above that value counts as a liability, and so does any increase in debt secured by the home in the 60 days before the sale, other than debt incurred to acquire the home.
Are the accredited investor thresholds adjusted for inflation?
No. The $1 million net worth, $200,000/$300,000 income and $5 million entity amounts are fixed in the rule. The SEC's September 2026 request for comment concerns new credential pathways and did not change the dollar tests.
Is there an accredited investor certificate?
No. Rule 501(a) provides no certificate or register. Each issuer establishes status for its own sale, by reasonable belief under Rule 506(b) or by reasonable verification steps under Rule 506(c).
Sources
- 17 CFR 230.501 - Definitions and terms used in Regulation D (accredited investor). U.S. Securities and Exchange Commission (CFR text via eCFR; LII mirror), eCFR current as of 2026-09-29; last amended 2025-02-18 (technical, 90 FR 9684); last substantive amendment effective 2020-12-08 (85 FR 64234). Status: in force (checked 2026-10-01). 17 CFR 230.501(a) introductory text, (a)(1)–(13); 230.501(a)(5)(i)(A)–(C) (primary residence and 60-day rule); 230.501(j) (spousal equivalent); source note (85 FR 64277, 2020-10-09; 90 FR 9687, 2025-02-18) — supports: All categories, thresholds and the primary-residence calculation; fixed dollar amounts with no indexing provision; amendment history
- Accredited Investor Definition (final rule), Release No. 33-10824. U.S. Securities and Exchange Commission, Adopted 2020-08-26; 85 FR 64234 (2020-10-09); effective 2020-12-08. Status: in force (checked 2026-10-01). Release 33-10824 rule page (issued 2020-08-26, effective 2020-12-08); adopting release section II.B (natural persons; entities; spousal equivalents) — supports: 2020 amendments: credentials, knowledgeable employees, family offices and family clients, LLCs, ERAs, RBICs, $5 million investments test, spousal equivalent
- 17 CFR 230.506 - Exemption for limited offers and sales without regard to dollar amount of offering (Rule 506(b) and 506(c)). U.S. Securities and Exchange Commission (CFR text via eCFR; LII mirror), eCFR current as of 2026-09-29; last amended 2021-06-09. Status: in force (checked 2026-10-01). 17 CFR 230.506(b)(2), 230.506(c)(2) — supports: 35 non-accredited sophisticated purchasers under 506(b); verification under 506(c)
- SEC Proposes Amendments to Expand Responsible Retailization of Private Markets (press release 2026-96). U.S. Securities and Exchange Commission, 2026-09-30. Status: proposed (checked 2026-10-01). Press release 2026-96 (2026-09-30) — supports: Request for comment on new credential pathways; proposal stage only
- Potential Designation of Chartered Financial Analyst Designation as Qualifying Natural Persons for Accredited Investor Status (notice; request for comment), Release No. 33-11447, File No. 4-933. U.S. Securities and Exchange Commission, 2026 (exact issue date not printed in the SEC-issued PDF; comment period 60 days after FR publication). Status: proposed (notice and request for comment) (checked 2026-10-01). Release 33-11447, Summary and Part I — supports: Notice and request for comment on possible designation of the CFA charter; no order issued
- Accredited Investors (glossary). U.S. Securities and Exchange Commission (Investor.gov), Accessed 2026-10-01. Status: current (checked 2026-10-01). Glossary entry — supports: Term defined in Rule 501 and used by exemptions such as Rule 506
- Order Designating Certain Professional Licenses as Qualifying Natural Persons for Accredited Investor Status (Release No. 33-10823). U.S. Securities and Exchange Commission, Issued 2020-08-26 with Release 33-10824; effective 2020-12-08. Status: in force (checked 2026-10-02). Order (Release 33-10823), p. 2 — supports: Series 7, Series 82 and Series 65 licences designated under Rule 501(a)(10), effective 2020-12-08
- 17 CFR 230.144A - Private resales of securities to institutions (Rule 144A; qualified institutional buyer). U.S. Securities and Exchange Commission (CFR text via eCFR; LII mirror), eCFR current as of 2026-09-29; last amended 2020-12-08. Status: in force (checked 2026-10-01). 17 CFR 230.144A(a)(1)(i) — supports: QIB: owns and invests on a discretionary basis at least $100 million in securities of unaffiliated issuers
- 15 U.S.C. 80a-2 - Definitions (Investment Company Act sec. 2, incl. 2(a)(48) BDC and 2(a)(51) qualified purchaser). U.S. Congress (United States Code; LII mirror), Current US Code text as published by LII (accessed 2026-10-01). Status: in force (checked 2026-10-01). 15 U.S.C. 80a-2(a)(51)(A) — supports: Qualified purchaser $5,000,000 / $25,000,000 investments tests
- 15 U.S.C. 80a-3 - Definition of investment company (Investment Company Act sec. 3, incl. 3(c)(1) and 3(c)(7)). U.S. Congress (United States Code; LII mirror), Current US Code text as published by LII (accessed 2026-10-01). Status: in force (checked 2026-10-01). 15 U.S.C. 80a-3(c)(7)(A) — supports: 3(c)(7) funds owned exclusively by qualified purchasers
- 17 CFR 270.3c-5 - Beneficial ownership by knowledgeable employees and certain other persons. U.S. Securities and Exchange Commission (CFR text via eCFR; LII mirror), eCFR current as of 2026-09-29; unchanged since 1997 adoption (62 FR 17529). Status: in force (checked 2026-10-01). 17 CFR 270.3c-5(b) — supports: Knowledgeable employees disregarded in the 3(c)(7) ownership test
- 17 CFR 275.205-3 - Exemption from the compensation prohibition of section 205(a)(1) for investment advisers (qualified client). U.S. Securities and Exchange Commission (CFR text via eCFR; LII mirror), eCFR current as of 2026-09-29; last amended 86 FR 62475 (2021-11-10). Status: in force (checked 2026-10-01). 17 CFR 275.205-3(b), (e) — supports: Equity owners charged a performance fee treated as clients; dollar tests adjusted for inflation by order
- Form D - Notice of Exempt Offering of Securities (form and instructions, paper version). U.S. Securities and Exchange Commission, SEC1972 (5/17); OMB No. 3235-0076, expires 2027-07-31. Status: in force (checked 2026-10-01). General Instructions (When to file) — supports: A mandatory capital commitment call is made under the original offering and is not a new offering