Complete Guide on How To Become An Accredited Investor In 2023


Becoming an accredited investor in 2023 can be an excellent opportunity for individuals looking to diversify their investment portfolios and gain access to exclusive investment opportunities.

Accredited investors are individuals or entities that meet specific financial requirements set by regulatory bodies, which allow them to invest in private offerings that are not available to the general public.

The process of becoming an accredited investor may seem complex, but with the right guidance and knowledge, anyone can attain this status.

In this complete guide article, we will cover everything you need to know about becoming an accredited investor in 2023, including the qualifications, the benefits, and the steps to take to achieve this status.


What is an Accredited Investor?

A person or entity registered with the Securities and Exchange Commission SEC to invest in securities is known as an accredited investor.

Accredited investors can make direct investments in the lucrative worlds of private equity, private placements, hedge funds, venture capital, and equity crowdfunding.


A firm can sell its own securities and investments to accredited investors under SEC rules.

Accredited investors appear to have legal access to things that are not available to the general public.

These investors can trade securities such as:

  • Hedged funds
  • Funds for venture capital
  • Private equity transactions
  • Angel fundraising through equity crowdfunding
  • Further private placements

What Is the SEC’s Definition of an Accredited Investor?

There are two ways to determine and define an accredited investor, according to SEC Regulation 501;

First, a person with income in excess of $200,000 in the two most recent years, or joint income with a spouse in excess of $300,000 in those years, and an expectation of earning the same amount in the current year.


Second, a person with an individual net worth or joint net worth with the spouse that exceeds $1 million at the time of purchase, excluding the value of the person’s primary dwelling.

Furthermore, an accredited investor is someone who possesses specific professional licenses, titles, or credentials.

The candidate should be a knowledgeable private fund employee9.

Finally, they must be SEC-registered investment advisers as well as state-registered investment advisers.

It is critical to remember that the income computation must adhere to the same structure for the two or three years mandated by the SEC.

That is, the individual must calculate yearly income either alone or with a partner, but not both.

What Motivates Individuals to Become Certified Investors?

To protect investors’ funds, a regulatory organization such as the SEC established criteria for investor accreditation.

The accreditation standards ensure that the investment owner has the expertise to understand investments and avoid financial loss.


It also allows them to build hedge funds to absorb any losses and repay investors’ monies.

These are some of the reasons why a governmental organization such as the SEC certifies investors.

Who Can Be Considered An Accredited Investor?

Those who meet the following criteria can become accredited investors:

  • People and their spouses
  • Institutions of finance.
  • Brokerage companies
  • A corporation or LLC with total assets in excess of $5 million that was not founded specifically to acquire the securities offered.
  • Employees of private funds who are knowledgeable.
  • Various sorts of insurance firms.
  • Employer-sponsored pension plans
  • Trusts
  • Firms that provide registered investing advice
  • Investment advisory businesses that are SEC-registered
  • Investment firms for businesses

Must Read: Easy Steps on How to Become a Certified Financial Planner


Several examinations must be passed in order to become an accredited investor.

Lately, the SEC has permitted an individual to pass one of these examinations.

These include income, net worth, professional certificates, and skilled private fund personnel.

Financial Qualification Requirement

These are the net worth and income tests.

To reiterate what was said earlier, having a net worth greater than $1 million is one method to become an accredited investor.

This figure does not include the value of their primary residence.

This is for personal net worth.

Similarly, an accredited investor will have earned more than $200,000 in pre-tax income in the two most recent tax years.

Similarly, the investor and their spouse can also become accredited.

They will have earned at least $300,000 before taxes in the preceding two years and the future year.

Again, excluding their primary house, the couple should have a net worth of $1 million.

Knowledge Exam

Individuals can also become certified investors by obtaining professional certificates and credentials that have been accredited by the right educational institutions.

The knowledgeable employee of private money comes in last on the knowledge tests.

As a result, knowledgeable employees will be defined.

Executive officers, directors, trustees, general partners, or a person serving as a private fund or affiliate management person are examples of knowledgeable personnel.

They can also be private fund workers or affiliate management people who have participated in the investing activities of a private fund or investment firm for at least 12 months.

Professional Certifications

Investors can get accredited to carry out investments for others if they have the necessary expertise and professional qualification.

Accredited investors can now be registered brokers and financial advisers, thanks to legislation passed by Congress in 2016.

As a result, the SEC revised the definition of an accredited investor, as detailed below.

Normally, these individuals can also qualify.

Individuals who hold certain professional qualifications, designations, or credentials, as defined by the SEC, or other credentials provided by a recognized educational institution.

Investment advisors who are SEC and state-registered.

Accreditation Documents

Expect to provide any of the following information before you can be granted accreditation status;

  • Financial statements and other account information
  • The credit report is used to confirm the net worth.
  • W-2 forms, tax returns, and other documents indicating earnings
  • Employees that are knowledgeable
  • The Financial Industry Regulatory Authority administers professional qualifications, designations, and credentials (FINRA).

A primary dwelling or primary home cannot be included in your net worth.

You can, however, include vacation and investment residences.

But, you must provide proof of ownership as well as a fair value.

The firm will check your documents after you submit them.

They will then either accept or refuse your accreditation status.

If your accreditation is approved, it is valid for one year or until the following tax day (if you verify via income).

Then you’ll be able to invest.

Trending: Complete Guide on How to Become a Freelancer

How to become An Accredited Investor in Different Countries

In the United States

Before you can become an accredited investor in the United States, you must have a net worth of at least $1,000,000, excluding the value of your primary residence, or have earned at least $200,000 per year for the last two years (or $300,000 combined income if married) and expect to earn the same amount this year.

An accredited investor is defined as follows in Rule 501 of Regulation D of the United States Securities and Exchange Commission (SEC):

a bank, insurance company, registered investment company, business development company, or small business investment company; an employee benefit plan, as defined by the Employee Retirement Income Security Act, if the investment decisions are made by a bank, insurance company, or registered investment adviser, or if the plan has total assets in excess of $5 million; a charitable organization, corporation, or partnership with assets in excess of $5 million; a director.

A natural person who possesses specific professional qualifications, designations, or credentials, as well as other credentials issued by an approved educational institution, as designated by the Commission from time to time.

  • Holders of the Series 7, Series 65, and Series 82 licenses in good standing.
  • In the case of private investments, natural individuals who are “knowledgeable workers” of a fund.
  • Accredited investors are limited liability corporations with assets of at least $5 million.
  • Exempt reporting advisers, SEC and state-registered investment advisers, and rural business investment corporations (RBICs) may be eligible.
  • Indian tribes, governmental bodies, funds, and enterprises constituted under the laws of foreign countries that own “investments” in excess of $5 million, as defined in Rule 2a51-1(b) of the Investment Company Act, and that were not founded for the express purpose of investing in the securities issued.
  • Family offices that manage at least $5 million in assets and their “family clients,” as defined by the Investment Advisers Act.
  • “Spousal equivalent” to the definition of accredited investor, so that spousal equivalents might pool their finances to qualify as qualified investors.

In Canada

According to NI 45 106, a “Accredited Investor” is:

a person registered as an adviser or dealer under the securities legislation of a Canadian jurisdiction, other than a person registered solely as a limited market dealer under one or both of the Securities Act (Ontario) or the Securities Act (Newfoundland and Labrador);

or an individual registered or formerly registered under the securities legislation of a Canadian jurisdiction as a representative of a person referred to in paragraph (a); or an individual.

In addition,

trust company or trust corporation registered or authorized to carry on business under the Trust and Loan Companies Act (Canada) or comparable legislation in a jurisdiction of Canada or a foreign jurisdiction, acting on behalf of a fully managed account managed by the trust company or trust corporation, as the case may be;

or an investment fund that distributes or has distributed securities only to I a person who is or was an accredited investor at the time of distribution;

or an investment fund that distributes or has distributed securities only to I a person who

It is worth noting that, as of 2016, many provinces in Canada have allowed non-accredited investors to invest in private markets, subject to certain restrictions.

See Also: Complete Guide on How To Become A Small Business Owner

What Are The Advantages of Becoming an Accredited Investor?

Availability of new investment opportunities:

Hedge funds, private equity, private placements, venture capital, real estate crowdfunding, limited partnerships, and other investments are available to accredited investors.

Increased diversification of your portfolio: 

When you become an authorized investor, you will have access to a broader range of investments.

You can often diversify portfolios by investing in alternative assets and unregistered securities that the other investor does not have access to.

Potential higher profits:

Furthermore, accredited investors have large income and assets that allow them to invest a portion of their portfolios in securities that have the potential to deliver significantly better returns than typical investments.

Actually, keep in mind that, unlike other investments, there is no loss hedge.

Ability to network with other high-net-worth investors: 

Individuals with large incomes and portfolios have greater access to networks with high-profile individuals.

This network may lead to more commercial and investment opportunities.

Disadvantages of being an accredited investor

There are other risks and disadvantages to becoming an accredited investor that should be considered.

They are as follows:


Several securities restricted to accredited investors are not listed on stock exchanges such as the NYSE.

They are traded infrequently, which makes them difficult to appraise and vulnerable to heightened volatility.

Illiquidity of many investments. 

Several securities are scarce because they are only available to accredited investors.

Increased minimum investment amounts.

Because SEC restrictions restrict the number of investors that particular securities can have without going public, the minimum investment amounts may be increased to ensure that the company has enough money to accomplish its goals.

High fees on products. 

Stocks with a big client base often have lower expenses, but with the restriction, expenses will be dispersed among a small number of people, raising the cost of products.


In conclusion, becoming an accredited investor in 2023 can be a lucrative opportunity for individuals seeking to expand their investment options.

The status of an accredited investor opens the door to exclusive investment opportunities that are not available to the general public, such as private equity, venture capital, and hedge funds.

However, becoming an accredited investor requires meeting certain financial criteria and completing the necessary steps to obtain accreditation.

By following the guidelines outlined in this guide, individuals can take the necessary steps to become an accredited investor and unlock new investment opportunities in the coming years.

Remember to always consult with a financial advisor or legal professional before making any investment decisions, and continuously educate yourself on the ever-changing investment landscape.

Click the button below to Gain Access to our Members’ Exclusive Group, before it fills up again.
[maxbutton id=”4″]

See what others are reading:




Feel free to share this post with others who will benefit from it using the buttons below!

Leave a Reply

Share to...