The SEC approved specific rules that limit the amount a non-accredited investor can invest. Non-accredited investors based in these states have the ability to invest in high-growth opportunities with early-stage firms through a model known as crowdfunding. This means that only the wealthiest individuals have access and can participate in early-stage investment.įew states have made it possible for non-accredited investors to attain equity in startups. While the company can receive investments from an unlimited number of accredited investors, according to Regulation D, it is limited to no more than 35 non-accredited investors providing funding.ĭue to Regulation D, more than 80 percent of non-accredited American investors are shut out from investment opportunities. An example would be a company interested in raising private equity to invest in something like a hedge fund or a new business. While non-accredited investors are allowed to invest, there are certain restrictions. This is not the case for an unsophisticated investor. The organization points out that an investor is considered sophisticated and maintains sufficient funds that can keep the investor protected. One of the things that make being accredited appealing is the fact it opens up new opportunities for investing in areas such as venture capital and hedge funds.Īnother asset of being accredited is noted by the SEC. For non-accredited investors, this means it would be illegal if someone were to present investment opportunities available in private businesses to you unless you know the founder of the company making the offer. In the United States, an accredited investor has access to investment opportunities that are not available to everyone. The matter of how much personal wealth a person has is the only distinction between being accredited and non-accredited. As long as an individual meets the minimum net worth, they are automatically accredited. There are no formal certifications or qualifications to be an accredited investor. The criteria set by the Securities and Exchange Commission's (SEC) Regulation D states that an accredited individual investor must have a net worth of more than $1 million (including the spouse), must have earned $200,000 or more annually for the last two years, and must also be a general partner, director, executive officer, or related combination. Differences Between Accredited and Non-Accredited Investors The investor must also have earned $200,000 or more annually for the last two years. This includes the net worth of his or her spouse.
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How to invest without being an accredited investor requires only that the investor has a net worth of less than $1 million. Differences Between Accredited and Non-Accredited Investors 2.
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