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In very simple terms, an “accredited investor” is someone with financial resources and professional expertise with access to certain investment opportunities that aren’t open to the general public, like hedge funds, family offices, or venture capital deals.
The accredited investor definition is ruled by the rules set out by the SEC - the U.S. Securities and Exchange Commission, under Rule 501 of Regulation D. (As of 3/15/2021), and mostly focuses on income, net worth, or professional background.
The SEC first introduced accreditation rules after the Great Depression, as part of the Securities Act of 1933. The last big update came in 1982, back when private funds were still a niche investment and made up only a small slice of the U.S. economy compared to today.
This could mean:
In addition to income and net worth thresholds, the SEC also allows certain licensed financial professionals to qualify as accredited investors. To qualify, individuals need to meet one of several possible criteria. These include having a net worth over $1M (excluding the value of a primary residence), earning more than $200,000 per year alone (or $300,000 with a spouse) for the past two years with expectations to maintain that annual income, or holding certain financial licenses (e.g., Series 7, 65, or 82) in good standing.
Other paths include serving as a director, general partner, or executive officer of the offering company, or assuming other professional or experience-based roles. Examples of accredited investors are individuals, institutional investors, family offices, investment advisors, registered investment advisers, and other financial entities.
For institutions, accreditation depends on the type of organization and the total assets it manages. Examples of accredited institutions include:
You don’t always need to be an accredited investor. For most people, regular investment opportunities, like stocks, ETFs, bonds, mutual funds, or real estate, are available without accreditation.
However, if you want access to private markets (venture capital, hedge funds, pre-IPO deals), then accredited status is mandatory. Regulators set this bar to protect investors who might not have the financial resources or expertise to handle higher-risk, less-regulated products.
Think of it this way:
In practice, accreditation isn’t a “must-have” for building wealth — but it’s a gateway if you want to explore early-stage startups, private placements, or specialized funds.
A non-accredited investor is simply someone who doesn’t meet the official criteria to be considered accredited.
These investors act more like retail investors who still have plenty of opportunities available to them, such as buying shares of public companies on stock exchanges, investing in bonds, or exploring other widely accessible assets like real estate and art.
Professional or accredited investor status has practical implications for the types of investments you can make and the opportunities available to you. The biggest advantage is the ability to bypass restrictions that apply to retail investors.
The concept becomes clearer when compared with retail investors.
Retail investors are everyday individuals who manage their investments through dedicated platforms or utilize the financial services of a professional investment adviser. They have more limitations on what deals they can access, how much they can invest, disclose, and follow strict rules around high-risk investments.
On the other hand, accredited investors are assumed to have more financial knowledge and experience to understand those risks. So, once they show more financial sophistication, they’re given bigger access to deals and products.
Although the terms are often confused, a qualified purchaser is not the same as an accredited investor. Both designations are used in U.S. securities law to define who can participate in certain private investments, but they apply at very different levels.
An accredited investor, as defined by the SEC under Regulation D, Rule 501, typically qualifies by meeting income or net worth thresholds, such as earning more than $200,000 annually ($300,000 with a spouse) or having a net worth exceeding $1M, excluding a primary residence. Holding certain financial licenses or professional roles can also provide accredited status.
A qualified purchaser, on the other hand, is defined under the Investment Company Act of 1940 and represents a much higher bar. Individuals generally need at least $5M in investments, while entities must hold $25M or more. Because of these stricter thresholds, qualified purchasers are allowed access to “3(c)(7) funds,” which are private investment vehicles unavailable even to accredited investors.
The key difference is that accredited investors are considered sophisticated enough to invest in private placements, hedge funds, or venture deals. At the same time, qualified purchasers are treated as an elite tier with access to the most exclusive and least regulated opportunities. Put simply, every qualified purchaser is an accredited investor, but not every accredited investor is a qualified purchaser.
Now, if you cross the Atlantic, the term itself doesn’t apply anymore. In Europe, the concept exists but under different names.
Instead of “accredited investor,” regulators use categories like professional client, qualified investor, or sophisticated investor. Each of these has its own criteria, which we’ll cover in a separate section below.
This way, regulators ensure that only people with the right financial knowledge or resources can participate in higher-risk investment strategies.
Across the European Union, the MiFID II directive, launched by the European Securities and Markets Authority, defines an accredited investor as a professional client. It identifies someone who has the expertise, knowledge, and experience to make better investment decisions and assess risks independently.
Anyone not automatically considered a professional, such as banks or institutional investors, can still be treated as one. For example, in the EU and Norway, there are three main tests to determine whether someone qualifies.
In the UK, the FCA doesn't formally use the term "accredited investor," but it has similar categories that serve the same purpose. There are High-Net-Worth Individuals (HNWIs) and Self-Certified Sophisticated Investors.
Although a lot of the UK’s regulatory structure was initially based on MiFID II, such as protections and organizational rules, the UK has begun diverging from the EU on several fronts, particularly when it comes to investor communications, disclosure requirements, and bundling of research fees.
Importantly, the specific tests the EU uses, like frequent transaction volume, having a high-value portfolio, or professional financial experience, do not apply in the UK. Instead, the UK has carved out a distinct path post-Brexit, with its own categories and thresholds reflecting a different regulatory philosophy.
Responsibilities
Opportunities
As we previously mentioned, investor classification is guided by the MiFID II framework, enforced by the European Securities and Markets Authority.
Individuals and small businesses not automatically treated as professional clients (often referred to as “per se” professionals) may opt up by meeting at least two of three criteria, according to ESMA:
In the UK, the FCA offers two main professional certification routes that function like accreditation:
You can qualify by meeting income or net worth thresholds, holding certain financial licenses, or serving in specific professional roles defined by the SEC.
Accredited investors gain access to private placements, hedge funds, venture capital, private equity, and other exclusive alternative investments.
Yes, non-accredited investors can invest in startups through regulated platforms like equity crowdfunding, though limits on investment amounts apply.
The main benefits are access to exclusive deals, the ability to invest larger amounts, and greater diversification into high-growth opportunities.
Individuals, trusts, family offices, and institutions that meet SEC income, net worth, or professional criteria qualify as accredited investors.
Becoming an accredited investor unlocks a world of opportunities that go far beyond traditional markets. With this status, you gain access to pre-IPO rounds, venture capital opportunities, and early-stage deals.
It also allows you to commit larger amounts, diversify into alternative assets, and step into deals earlier, where the growth potential is highest.
If you are an accredited investor (or think you might be), why not utilize your status to its fullest potential? Join the SeedBlink Investor Community and tap into an ecosystem that supports founders and backers alike.
As a member, you’ll get exclusive access to vetted startup rounds, secondary market deals, and networking with experts.
> The rise of the digital retail investors and their revolution
> Exit strategies for retail startup investors
> Making the first steps as a retail investor, in discussion with Martin Markov
SeedBlink S.A. is registered in the Register of the Romanian Financial Supervisory Authority (ASF), under number PJR28FSFPR/400001, as of 03.11.2022 with an EU passport as per European Securities and Market Authority (ESMA) register of crowdfunding services providers.
