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Definition of Accredited Investor

 Accredited Investor is a term used by the Securities and Exchange Commission (SEC) under Regulation D to refer to investors who are financially sophisticated and have a reduced need for the protection provided by certain government filings.

In order for an individual to qualify as an accredited investor, he or she must accomplish one of the following:

1) earn an individual income of more than $200,000 per year, or a joint income of $300,000, in each of the last two years and expect to reasonably maintain the same level of income.
2) have a net worth exceeding $1 million, either individually or jointly with his or her spouse.
3) be a general partner, executive officer, director or a related combination thereof for the issuer of a security being offered.

These investors are considered to be fully functional without all the restrictions of the SEC.

As a rule, owners of privately held companies must use a majority of accredited investors when seeking capital. This is becoming more and more difficult because of the recent turn in the economy as well as recent changes in the rules of what determines whether someone is or isn't an accredited investor.

With the Independent Stock Market, both accredited and non-accredited investors can now participate in helping privately held businesses obtain the capital they need.