Understanding accredited investor requirements

What is an "accredited investor"?

It's a category defined by the U.S. Securities and Exchange Commission under Regulation D of the Securities Act of 1933. Certain private investment offerings may be exempt from SEC registration under applicable federal securities laws. In exchange, securities law generally limits who can participate to people and entities the SEC considers able to evaluate the risks and absorb a loss: accredited investors.

Who qualifies as an individual?

You're accredited if either of these is true:

• Net worth: over $1,000,000, alone or together with a spouse, excluding the value of your primary residence; or
• Income: over $200,000 individually (or $300,000 jointly with a spouse) in each of the two most recent years, with a reasonable expectation of the same in the current year.

The SEC also recognizes certain professional credentials (for example, holders of Series 7, 65, or 82 licenses in good standing).

Who qualifies as an entity?

Examples include LLCs, trusts, IRAs, and family entities:

• All of the entity's equity owners are themselves accredited investors; or
• The entity has over $5,000,000 in assets and was not formed for the specific purpose of acquiring the investment offered.

Accredited investors may be eligible to participate through self-directed IRAs, trusts, LLCs, or other eligible entities, subject to the requirements of the applicable offering.

How is investor eligibility determined?

Investor eligibility is determined in accordance with applicable securities laws and the requirements of the specific offering. Investors may be asked to reconfirm their eligibility from time to time.

Why does this matter?

Accredited investor requirements are part of the regulatory framework governing many private investment offerings under federal securities laws. Certain Miller Bates investment offerings are limited to accredited investors.

Honest answers to common questions

• "My house puts me over $1M — do I qualify?" Your primary residence is excluded from the net-worth test. Other real estate counts.
• "My income qualified last year but not the year before?" The income test looks at each of the last two years. If you don't meet it, check the net-worth test instead.
• "Can my IRA invest?" Possibly. Self-directed IRAs may be eligible to invest, subject to the requirements of the applicable offering and your IRA custodian's rules. Consult your custodian and tax advisor regarding your specific situation.
• "What if I'm not accredited?" Eligibility requirements vary by offering and applicable securities laws.