Accredited Investor Requirements

An accredited investor is an individual or entity that meets specific financial criteria established by the U.S. Securities and Exchange Commission (SEC). This designation allows investors to participate in certain private investment offerings that are not registered with the SEC, including most Delaware Statutory Trust (DST) investments.

The SEC created the accredited investor standard to identify investors who are presumed to have the financial sophistication, resources, and risk tolerance to participate in private securities offerings without the full protections provided by SEC registration. While this doesn't guarantee investment success, it establishes a baseline for participation in private markets.

One path to accredited investor status is meeting income thresholds. The SEC evaluates income over the past two years with a reasonable expectation of reaching the same level in the current year.

The second primary path to accredited investor status is through net worth. An individual or couple can qualify with a net worth exceeding $1 million, excluding the value of their primary residence.

What counts toward net worth: Investment accounts, retirement accounts (IRAs, 401(k)s), real estate (excluding primary residence), business equity, vehicles, and other personal property.

What to subtract: Mortgages (other than primary residence), credit card debt, student loans, auto loans, and other liabilities. If your primary residence mortgage exceeds the home's value, that excess debt counts against your net worth.

In 2020, the SEC expanded the accredited investor definition to include individuals holding certain professional certifications, designations, or credentials. This recognizes that financial sophistication can come from professional experience, not just wealth.

Entities can also qualify as accredited investors under various standards. This allows trusts, corporations, LLCs, and other entities to invest in private offerings.

When investing in DSTs or other Regulation D offerings, issuers must take reasonable steps to verify accredited investor status. Verification methods vary by qualification type:

Qualification timing: Your accredited status is evaluated at the time of investment. If your circumstances change after investing, it doesn't affect prior investments.

Spousal considerations: For joint income qualification, both spouses must reasonably expect to reach the threshold. For net worth, assets held jointly or individually by either spouse count toward the total.

Not accredited yet? If you don't currently qualify as an accredited investor, you may want to explore other investment options while building toward accreditation thresholds. Some real estate investments, like publicly-traded REITs, are available to non-accredited investors.