Accredited investor

Definition

Someone the securities rules let you raise from privately.

Why It Matters

Raising search capital or filling an equity gap almost always means staying inside a private-offering exemption, and Rule 506 is written around who your money comes from. Under 506(c) every buyer must be accredited. Under 506(b) up to 35 others may join only if they are sophisticated, and they are owed disclosure an accredited investor is not. A check from a friend who fits neither can unwind a raise long after it is spent, which is why the question gets asked before the wire and in writing.

In numbers: The usual tests are $200,000 of individual income, or $300,000 with a spouse, in each of the last two years, or $1M of net worth counted without the family home.