We get a lot of questions about Accredited and Unaccredited Investors. We'd like to clarify what accreditation means, why it matters, and how FI works with these investors.
What does "Accredited Investor" mean?
"In the United States, to be considered an accredited investor, one must have a net worth of at least $1,000,000, excluding the value of one's primary residence, or have income at least $200,000 each year for the last two years (or $300,000 combined income if married) and have the expectation to make the same amount this year. The term "accredited investor" is defined in Rule 501 of Regulation D of the U.S. Securities and Exchange Commission"
You can read more about Accredited Investors from the SEC website.
What is an Unaccredited Investor?
An Unaccredited Investor is anyone who does not meet the Accredited Investor requirements.
Why does Investor Accreditation exist?
"The Securities and Exchange Commission (SEC) created this distinction to refer to individuals who are considered “sophisticated investors.” These types of investor may not necessarily require the same protection that smaller or novice investors may need when investing in a project.
It was created as a protective measurement to protect the novice investors from getting into riskier projects, especially because they may not have the fund reserves to handle a loss."
At FI, we don't necessarily agree with this rationale that an individual's wealth determines their investing acumen, but that is the basis of the law.
For more information, see our Everyone Network page (which is for unaccredited investors) and our Accredited Network page (for accredited investors).