accredited investor

Securities RegulationLegal glossary term

Legal Definition

An accredited investor is an individual or entity that meets specific legal criteria, typically defined by the Securities Act of 1933 and the Securities Exchange Act of 1933, to be eligible to participate in a securities offering, such as a security offering or investment, under the rules of the U.S. Securities and Exchange Commission.

Plain-English Translation

Imagine an accredited investor is someone who has the legal permission to buy stocks or investments that are usually expensive or exclusive. They have met certain requirements so they can participate in the market for securities.

Context in Contracts

It matters because it determines who is legally allowed to buy certain types of securities, especially those offered through regulated processes, ensuring that investors meet the minimum standards for financial participation.

Visual model

Understand accredited investor fast

ELI10 illustration for accredited investor

An individual who has sufficient net worth and income to qualify as an accredited investor.

A corporation that qualifies as an accredited investor under specific regulatory definitions.

Document context

How accredited investor shows up in legal documents

What is it?

An individual or entity that possesses the requisite legal status, as defined by the U.S. Securities laws, to invest in a security offering without incurring special exemptions.

Why does it matter?

When does it matter?

When discussing the issuance or offering of securities, particularly in contexts where investor qualifications are scrutinized under federal securities law.

Where is it usually seen?

Typically found in regulatory filings, prospectus documents, and legal agreements related to the sale of securities.

Who is affected?

Individuals or entities that have met the specific criteria set by the U.S. Securities laws to be recognized as qualified investors for a particular security offering.

How does it work?

The investor must demonstrate that they meet the legal threshold (e.g., net worth, income, or professional experience) required by the regulations to participate in a regulated market.

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