Accredited Investor Definition
The Security and Exchange Commission’s Rule 501 of Regulation D (as of 2019) states the accredited investor definition.
An accredited investor is someone who
- earned more than $200,000 annually for the past two years,
- or earned more than $300,000 annually, combined with their spouse, for the past two years,
- or has a net worth of at least $1 million (solo or combined with their spouse) excluding their home.
Trusts, banks, partnerships and corporations can also qualify to be accredited investors. Registered brokers and investment advisers can be eligible too.
Accredited investors can invest in opportunities that the general public can’t. These include hedge funds, venture capital funds, angel investments and private equity deals.
As an exception to the financial accredited investor requirements, those who demonstrate sufficient knowledge or experience with securities that aren’t registered with the SEC can qualify as accredited investors.
What’s the Reason for These Accredited Investor Requirements?
The SEC restricts certain types of investments to protect investors. Accredited investor requirements ensure that if investors lose the whole of their investment they still have income to live. The requirements also intend to make sure that accredited investors have the financial savvy to understand these kinds of investments and the associated risks.
You must be an accredited investor to buy into investments that aren’t registered with the SEC, called unregistered investments or unregistered securities. These tend to be higher risk/higher reward opportunities. They’re restricted to accredited investors so that those who invest understand the risks and have a financial cushion if the investments don’t succeed.
How to Become an Accredited Investor
There’s no registration or application form to become an accredited investor. Instead, the companies or organizations offering investments to accredited investors must ensure that the investors are accredited.
They may accomplish this by having potential investors answer a questionnaire or provide financial statements, such as tax returns, W-2 forms or letters from accountants, attorneys or investment advisers. They also may evaluate an investor’s credit report.
How to Start Investing in Oil
To invest in EnergyFunders’ oil and gas investments, you must become an accredited investor utilizing our accreditation questionnaire. While we carefully vet all investments and present only the best to investors, there are still risks of direct oil and gas investments. We give you a strategy for success in oil and gas investing and encourage you to carefully review all investments to ensure that they are right for your portfolio.
Create a free account to view our current investments today.