SEC Definitions of Investors

Updated 2 months ago by Sanjay Vora

Confused on all the different definitions of investor types. This article will help.

The following is how the SEC defines investor qualifications:

Accredited Investor (individual)

Income - to qualify, your individual income must be over $200,000 or over $300,000 as joint income with your spouse, in each of the two most recent years.

Assets - to qualify, your current individual or joint net worth must be over $1,000,000.

Accredited Investor (entity)

Includes Limited Liability Companies, Corporations, Partnerships, Foundations, or Endowments

The Investor has total assets in excess of $5,000,000 and was not formed for the specific purpose of acquiring the securities offered.

Qualified Eligible Persons

A US citizen who owns at least $2,000,000 of securities and other investments excluding their primary residence. The investor has had an open account for at least six months with at least $250,000 for Securities & Futures trading. Current regulations require a brokerage statement(s) no older than 3 months for verification.

Qualified Client

To qualify as a “qualified client” on or after the August 16, 2021 effective date, a natural person or company must:

1. have at least $1.1 million of assets under management with the adviser immediately after entering into the investment advisory contract with the adviser;

2. have a net worth (together, in the case of a client who is a natural person, with assets held jointly with a spouse) of more than $2.2 million (excluding the value of such natural person’s primary residence and indebtedness secured by such residence) immediately prior to entering into the contract;

3. be a “qualified purchaser” as defined in Section 2(a)(51)(A) of the Investment Company Act of 1940; or

4. be a “knowledgeable employee” of the adviser

Qualified Purchaser (individual/joint)

To qualify, your current individual or joint net worth must be over $5,000,000.

Qualified Purchaser (entity)

Includes Limited Liability Companies, Corporations, Partnerships, Foundations, or Endowments

The Investor (i) is acting for its own account or the accounts of other Qualified Purchasers, (ii) in the aggregate, owns and invests on a discretionary basis $25,000,000 or more in Investments, (iii) is not a “company” that is excluded from the definition of “qualified purchaser” under the Investment Company Act and the rules and regulations thereunder because of Section 2(a)(51)(C) of the Investment Company Act4, and (iv) was not formed for the specific purpose of acquiring the Interest(s). In making this determination, subtract the amount of any outstanding indebtedness incurred to make the Investments.


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