An accredited investor is any person or entity with enough experience to invest in unregistered securities.
In the United States, the Securities and Exchange Commission (SEC) sets the standards for becoming an accredited investor.
Under SEC law, companies and private funds cannot sell securities unless they are registered with the SEC. Some securities are exempt from registration and the SEC let’s companies sell these unregistered securities only to accredited investors.
According to the SEC, an Accredited Investor is anyone who:
For an entity to be considered an accredited investor it must be:
The SEC defines a “sophisticated person” as someone with sufficient knowledge and experience to fully evaluate the investment opportunity.
For more info, please visit the SEC’s website.
The SEC created accredited investors to protect people and entities from too much financial risk. The SEC considers unregistered securities more risky than investing in registered securities.
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